MBK sees most productive year ever, returning $5.3 bn to investors

MBK Partners will be bold in moving into more Asian markets this year, wrote the company's founder and chairman Michael ByungJu Kim, in his annual letter to investors on March 15.

His core message was "Noli timere," meaning "Do not be afraid," in Latin, saying this is the time to invest despite uncertainties such as worldwide inflation, the US-China feud and the Russia-Ukraine war. The markets will be the lighted path as they have been through the post-World War II period, said the chairman of South Korea’s top private equity firm.

MBK Partners, one of the largest private equity firms in Asia, has executed 61 investments over the past 17 years since its inception and is managing $25.6 billion in assets. The chairman has distributed annual letters since 2008 to investors, which include global pension funds Korea’s National Pension Service (NPS), The Canada Pension Plan Investment Board and Singaporean sovereign wealth fund GIC Private Limited.

In his previous letter to investors in March 2021, at the peak of the pandemic, he said a "golden window of opportunity" was opening across markets. “Cash is king, and never more so than in a recovering market,” he wrote at the time. 

Last year, the PE firm deployed $4 billion in investments in Korea, China and Japan and had a landmark year in exits, returning $5.3 billion to its investors. It was the largest distribution to investors in its 17-year history.

The $4 billion of capital, including limited partners’ co-investments, was deployed to 13 new investments across buyouts and special situations. In buyouts, the PE firm completed the acquisition of CAR Inc., the largest car rental company in China, for $1,161.2 million in equity. It also invested $795 million in the acquisition of Haihe and Haibo Theme Parks in China. In Japan, MBK invested $326.1 million in the acquisition of Tsukui Holdings, a leading daytime care services provider for senior citizens.

In Korea, MBK acquired footwear textile manufacturers Dongjin Textile Co. and Kyungjin Textile Co., suppliers to Nike and Adidas, investing $343.6 million. It also invested in two tech firms, with the acquisition of e-commerce service provider KoreaCenter Co. for $406.7 million and an injection of $147 million equity in online banking service K Bank. Additionally, MBK completed add-on investments for golf course management firm Golfzon County for $48.7 million.

2021 was a special year for exits, Kim said. The company saw record-high returns by exiting China’s Apex Logistics, returning $744 million for a 36.4% internal rate of return (IRR), Korea’s Doosan Machine Tools, returning $1.2 billion and a 50% IRR, and Japan's Accordia Next Golf, returning $1.5 billion for a 21.8% IRR for its buyout fund III and 61.2% for fund IV.

The values of MBK’s five funds have surged, Kim said in the letter. Its buyout fund II, currently being liquidated, has nearly tripled in value since its inception. Buyout funds III and IV have both increased by 2.2 times in value, and special situations fund I has doubled. On an absolute return basis, the IRR of the five funds at year-end 2021 was 24.6%. The PE firm’s return over the past 17 years has reached $18.1 billion, the chairman said.

The pandemic accelerated trends that were already taking off in consumer sectors, in how consumers consume and how businesses sell to them, said Kim. “One such powerful force has been the competitive threat and opportunity of technology. We practiced our mantra, that every business is a tech business,” said the chairman. This aligns with his core message in the last interview with The Korea Economic Daily that offline and online businesses need to be more tightly integrated.

MBK has over $5.7 billion in dry powder. The PE firm’s senior investment team has worked together for nearly 23 years, experiencing several market crises, from the Asia Financial Crisis of 1998 to COVID-19, said Kim. “We shared with you our experience that the years following an upheaval bring opportunity. We are more sanguine than we have been in years about the investment environment and our place in it,” said Kim.

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