MBK's $1.2 bn stake sale brings value on par with TPG

North Asia-focused MBK Partners has closed a $1.18 billion deal to sell its 12.5% stake to New York-based Dyal Capital at an equity valuation of nearly $10 billion, according to people with knowledge of the matter on Tuesday.

The stake deal, aimed at forming a partnership with the US alternative asset manager, has raised MBK's value to be on par with that of TPG Inc. and propelled it to become Asia's most valuable PE house.

TPG, one of the world's top five PE giants, went public on the Nasdaq in January of this year. 

The deal size was disclosed when both MBK and Dyal outlined the transaction to their limited partners (LPs). 

By comparison, the corporate value of Baring Private Equity Asia, one of Asia's three largest PE firms, was pinned at €6.8 billion ($7.5 billion) by Stockholm-based EQT Partners, which agreed last week to acquire Baring PEA.

In terms of assets under management (AUM), MBK is already Asia's largest independent PE house, with about 75 in-house investment managers across South Korea, China and Japan.

Its AUM has grown by 29% per year on average to $25.6 billion of late, compared with $1.18 billion in its first year in business in 2005. 

Over the past 17 years, MBK has exited 35 deals that delivered an internal rate of return (IRR) of 19% or higher. That far exceeded the PE industry's 8% threshold, or the minimum IRR required for PE houses to receive performance bonuses from LPs.

PE houses' incomes are composed mainly of a management fee equivalent to 1-1.5% of the fund size they manage and performance bonuses at the time of a fund liquidation. 

Given the absence of tangible assets on its balance sheet except for portfolio companies, a PE firm's valuation reflects investors' evaluation of its capacity and capability of deal sourcing, portfolio management and exits, based on its track record and expertise of investment managers.

Additionally, the distribution to paid-in capital multiple, or total distributions to LPs divided by paid-in capital, is used as a key measure of PE house's valuation.

GETTING BIGGER

MBK's stake sale comes as global PE titans are bulking up their Asia-focused funds in search of higher returns.

KKR & Co. closed its fourth Asia fund on $1.4 billion in April of last year. Blackstone Inc., the world's largest PE firm, is raising a $9 billion Asia-focused real estate fund. The Carlyle Group is working on its sixth Asia fund after it launched a $6.55 billion won Asia-dedicated fund in 2018.

"Private equity markets in Europe and North America have grown a combined 14% over the past six years," said one of the sources. "By comparison, Asia's PE market expanded by 24% during the period. It's no wonder that the value of PE firms with expertise in Asia is going up."  

Dyal Capital is a division of Blue Owl Capital, a US alternative asset manager with $94.5 billion in AUM.  

MBK was founded by a former Carlyle Group Asia head Michael ByungJu Kim in 2005. Its portfolio includes a Korean supermarket chain Homeplus; Lotte Card Co.; home decor company Modern House; and Golfzone County, the country's largest golf course management firm.

Last year, MBK achieved double-digit IRRs, or billion-dollar returns from three divestments in South Korea, China and Japan simultaneously. The three companies are Japan's Accordia Next Golf, China's Apex International Corp. and South Korea's Doosan Machine Tools.

The three transactions ranked among the nine largest PE exit deals in the three countries in 2021.

On the contrary, MBK has not yet exited from NEPA, an outdoor clothing firm, for nearly a decade.

(This article was updated and corrected on March 23 to reflect comments from both MBK and Dyal Capital)

Write to Jun-Ho Cha at chacha@hankyung.com
Yeonhee Kim edited this article.