DIG Airgas, Air Products Korea: Two Korean megadeals in the offing

South Korea’s mergers and acquisitions market is gearing up for two megadeals involving specialty gas makers, worth 5 trillion won ($3.4 billion) each: DIG Airgas Co. and Air Products Korea Inc.

Fierce competition among investment banks (IBs) and private equity firms (PEFs) has already begun, with the DIG Airgas owner kicking off a sale process.

Air Products Korea, whose sales process was put on hold just before the final bidding last October, is also expected to be up for sale again soon, heating up Korea’s M&A market in the first half of the year.

According to investment banking industry sources on Friday, Macquarie Asset Management, DIG Air Gas’ largest shareholder, earlier this week began a process to select the lead sales manager from among interested global IBs.

The asset management division of Australia’s Macquarie Group plans to pick one or two IBs to manage the sale of its 100% stake in DIG Airgas, Korea’s No. 3 industrial gas producer.

DIG Airgas produces specialty gases used in semiconductors and the display, solar cell and LED sectors. The company counts the world’s two largest memory chipmakers — Samsung Electronics Co. and SK Hynix Inc. — among its major clients.

SALE OF AIR PRODUCTS KOREA SET TO RESUME

The sale of Air Products Korea was abruptly halted last October, at the start of the final bidding stage.

The move was influenced by activist fund Mantle Ridge LP’s actions against Air Products Korea’s US parent, Air Products and Chemicals Inc.

Mantle Ridge, which had secured over $1 billion worth of the US industrial gas maker’s shares since March 2024, requested that Air Products’ board draw up clear management succession plans, taking issue with the age of current CEO Seifi Ghasemi, who is in his 80s.

Industry watchers said that once the activist fund's actions subside, the sale of Air Products Korea will quickly resume.

The US gas maker has put non-core assets worldwide on the market to secure funds for corporate restructuring, and the sale of its Korean subsidiary is central to the restructuring process.

Air Products Korea supplies specialty gases such as nitrogen, helium and oxygen to companies, including Samsung and SK Hynix, for industrial use.

Air Products Korea ranked No. 2 in the Korean industrial gas market with a 22.2% share last year, after market leader Linde Korea Co., which held a 30.1% share.

The No. 3 and 4 players, DIG Airgas and AirFirst Co., together account for some 38% of the country’s industrial gas market.

Formerly known as Daesung Industrial Gases, DIG Airgas was taken over in 2017 by PE firm MBK Partners for 1.8 trillion won when it was in financial distress.

Two years later, it was sold to Macquarie for 2.5 trillion won.

CONFLICT OF INTEREST

Analysts said a key question in the sale of DIG Airgas is whether the seller will allow global IBs and PEFs that participated in last year's Air Products Korea sale to also take part in this deal.

“If firms that advised on the Air Products Korea acquisition are allowed to act as advisors for the DIG Airgas sale, it could create a conflict of interest if they also join in the resumed Air Products Korea sale,” said an investment bank executive.

Macquarie cannot proceed with the deal without involving major IBs, however, which creates a challenging situation for the seller of DIG Airgas.

Last year, Air Products and Chemicals selected Citigroup Global Markets Inc. as the lead manager to sell its Korean affiliate.

Two potential buyers — KKR & Co. and MBK Partners — competed fiercely in the final bidding round before the deal was halted.

Industry officials said Morgan Stanley and JPMorgan, which advised KKR on the acquisition, and Goldman Sachs, which acted as the advisor to MBK Partners at the time, could be denied their advisory role in the upcoming sale of DIG Airgas.

With two assets, each valued at about 5 trillion won, poised to emerge as targets of megadeals, PEFs are scrambling to assess their strategies and potential returns.

Industry officials said MBK Partners, which reaped handsome returns from its sale of Daesung Industrial Gases, may be interested in Air Products Korea this time, as other global PEFs compete for DIG Airgas.

Write to Jun-Ho Cha at chacha@hankyung.com
In-Soo Nam edited this article.