KKR mulls investment in Hyundai Heavy's maintenance arm

South Korea's leading shipbuilder Hyundai Heavy Industries Holdings Co. is in talks with global private equity firm KKR to secure investments as part of the pre-IPO placement for Hyundai Global Service, according to the investment banking industry on Oct. 22.

Hyundai Heavy Industries and KKR began exclusive negotiations in August, but the two parties are finding it difficult to agree on the valuation of the group's maintenance arm.

Hyundai Heavy has placed Hyundai Global's valuation at around 2 trillion won ($1.7 billion), which has not been well received by KKR as the company's EBITDA is within 100 billion won, meaning that the group is seeking a valuation with a multiple of over twenty times.

The stake amount has not been specified but it is likely to be in a range of a 30-40% stake. If the company is valued at around 2 trillion won, then Hyundai Global could fetch up to 800 billion won ($705 million).

“Hyundai Global is still in the early stages of growth so its network has not yet tapped into the overseas operations run by Hyundai Heavy. But the company is likely to show rapid growth once it raises capital and begins to secure a network overseas,” said a source from the investment banking industry.

Further, once Hyundai Heavy’s acquisition of Daewoo Shipbuilding & Marine Engineering Co. goes through it will benefit the buyer, as the group will see a huge bump in the number of ships. 

Hyundai Global was spun off from Hyundai Heavy Industries in 2016. The company provides eco-friendly products and solutions, alongside handling maintenance services for ships built by the Hyundai Heavy Industry Group as well as from other dockyards. 

The company’s business has performed well owing to recent eco-friendly regulations implemented by the International Maritime Organization (IMO). There has been increased demand from ships switching from ship fuel oil to liquefied natural gas, alongside orders for the company's eco-friendly scrubbers.

In 2019, the company posted 809 billion won in revenue and an operating profit of 108.5 billion won. The company aims to post 2 trillion won in revenue with an operating profit of 403 billion won backed by orders worth $2.3 billion in 2022.

Meanwhile, KKR has been the most active among global PE firms in terms of Korea-based activities. In August, the PE firm acquired two South Korean waste treatment companies from Hong Kong-based private equity firm Anchor Equity Partners for 875 billion won. Earlier this month, the firm acquired a combined $386 million worth of shares in TSK Corp., a leading South Korean sewage and wastewater treatment firm.


Write to Jun-ho Cha at chacha@hankyung.com
Danbee Lee edited this article.