PEF-owned Korean firms jumping off IPO bandwagon

South Korea's initial public offering market is gaining fresh momentum from high-profile listings such as mobile banking app KakaoBank and game developer Krafton Inc. in the coming weeks.

But a number of private equity firms have slammed the brakes on the IPOs of their long-held Korean assets, only a few months after they revisited the listing plan.

Lower-than-expected IPO valuations were blamed for their withdrawals, following the recent downward revisions to the offering price by Krafton, the label behind the popular online game PUBG, and SD Biosensor Inc., the country's top test kits maker.

Baring Private Equity Asia has put on hold a plan to list Logen Co., South Korea's No. 5 parcel delivery firm, by year's end, according to investment banking sources on Thursday. Instead, the Hong Kong-based PEF decided to look for a buyer again, after its two previous attempts to sell Logen in 2016 and 2020 fell through.

Anchor Equity Partners has scrapped a plan to list coffeehouse chain A Twosome Place, about a month after it issued a request for proposals to select an IPO manager in May. It was supposed to become South Korea's first listed coffee chain.
 
TMON, an e-commerce platform majority-owned by KKR & Co. and Anchor Equity, has made little progress in its IPO. Given the accumulated losses, analysts saw a slim chance of its public offering taking place within the year. Both KKR and Anchor Equity had invested in TMON, short for Ticket Monster, in 2015.

Since MBK Partners and VIG Partners took public then ING Life Insurance Co., currently Orange Life Insurance, and Samyang Optics Co., a camera lens maker, in 2017, there has been the absence of PEF-owned companies' IPOs in South Korea.

The two PEFs have also struggled to list their other Korean portfolio companies. MBK had halted IPO plans for both Doosan Machine Tools Co. and a real estate trust management firm backed by Homeplus Co., a supermarket chain. Seoul-based VIG Partners has made little progress in the public offering of Bodyfriend Inc., a massage chair brand, for which it began the IPO process in 2018.

Investment bankers say taking public PEF-owned companies are one of their trickiest jobs. Their IPOs need to be priced above their purchase price. The IPO managers are also required to come up with a detailed post-IPO exit plan, because the owners are not allowed to dump all their shares through an IPO.

"We also need to carry the risk that the IPO plan could be scrapped any time," said one of the investment banking sources.

One example was KCF Technologies Co. KKR had hired three Korean brokerage companies as IPO managers of the producer of copper foils and flexible copper clad laminates used in lithium-ion batteries, but it abruptly stopped the IPO and sold the company to SKC Ltd. for 1.2 trillion won in 2019.

EYES ON OTHER PEF-OWNED COMPANIES

Now market eyes are on two IPO candidates owned by Seoul-based private equity firm Hahn & Co., as well as a Blackstone-backed handbag maker.

H-Line Shipping Co. appears to remain on track for this year's IPO. The country's second-largest bulk transportation company has resumed its IPO process, after a three-year hiatus. Last month, K Car Co., a used car seller, applied for a stock market listing. Both companies are held by Hahn & Co.
 
Handbag maker Simone Acc. Collection Ltd., 30% owned by Blackstone, has kicked off the process to list its shares on the Korea Exchange.

Meanwhile, South Korea's STIC Investments Inc. is expected to secure up to 109 billion won ($96 million) in proceeds from the IPOs of two Korean companies, in which it had invested a combined 160 billion won as a financial investor.

Write to Jin-seong Kim at  jskim1028@hankyung.com
Yeonhee Kim edited this article.