GS Group's petrochem equipment unit eyes up to $154 mn via pre-IPO

GS Entec Corp., a South Korean equipment maker for petrochemical and power plants, is set to raise 150 billion to 200 billion won ($115 million-$154 million) from local private equity firms through a pre-IPO funding round.

The GS Group unit has tapped Samjong KPMG, a member firm of the KPMG global organization, as the lead manager for the funding round and will issue new shares, according to investment banking sources on Friday.

The GS Group unit in early April shortlisted three potential buyers: H&Q Korea, Woori Private Equity Asset Management and Simone Investment Managers. H&Q Korea and Woori PE, which manage blind pool funds worth 506 billion won and 165 billion won, respectively, are said to be strong candidates.

As the sale of a minority stake has limited upside potential to increase GS Entec’s value, the candidates are focusing on how much return will be guaranteed through a public offering, sources said.

NO PUT OPTION OFFERED THIS TIME

GS Entec won’t offer a put option to new financial investors as its parent and general trading company GS Global Corp. has bought back a significant amount of the subsidiary’s shares with interest.

The parent company sold a combined 100 billion won in convertible preferred stocks to previous financial investors during three funding rounds between 2011 and 2013, providing put options.

Under the agreement, GS Global committed to buying GS Entec shares back at a compounded annual rate of 6%-7% from the investors at the time, including Dominus Investment, Neostar Investment and Woori Bank, if the equipment maker failed to go public by 2017.

The financial investors exercised the option as GS Entec failed to IPO. As a result, parent GS Global’s holdings in GS Entec surged from 44.1% in 2015 to 93.1% in 2017.

GS Entec, which builds heat exchangers and reactors, is stressing the potential growth of the petrochemicals and power generation industries.

Last July, the company inked a strategic partnership with SiF Netherlands B.V to enter the Asian offshore wind power market. GS Entech will become the Dutch firm’s first Korean partner to manufacture the foundations for offshore wind power turbine, called monopiles.

Founded in 1988 as Daekyung OECE, the equipment maker was acquired by GS Global and renamed GS Entec in 2014. The company recorded 118.5 billion won in revenue and 17.6 billion won in operating loss last year.
 
Write to Ji-Eun Ha at hazzys@hankyung.com
Jihyun Kim edited this article.