South Korea’s Doosan Machine Tools Co., sold to Asia’s biggest private equity group MBK Partners in 2016, is back on the market after the fund abandoned its plan to take the company public.
MBK Partners has tapped Bank of America Merrill Lynch to manage the sale that is expected to cost up to 3 trillion won ($2.52 billion), given its financial soundness, according to investment banking sources on Wednesday.
Documents about the sale, including financial information about the company and proposed structure of the deal, have been sent out to potential buyers. The invite went to many global private equity funds as well as Korean and foreign business groups, according to sources.
Based in Seoul, Doosan Machine Tools is Korea’s largest manufacturer of turning centers, machining centers and other precision machine tools. It was created in 2016 from a demerger of Doosan Infracore Co., the construction equipment making unit of Korean conglomerate Doosan Group. Later that year, MBK Partners acquired the entire stake in the company in a 1.1-trillion-won deal, including 400 billion won in funding and 700 billion won in buyout financing.
MBK Partner attempted to cash out through an initial public offering of Doosan Machine Tools last year. Preparations for the preliminary filing were well underway, with NH Investment & Securities, BoA Merrill Lynch and Credit Suisse Group AG serving as the advisory team. But the IPO plans were put on hold as shares of Doosan’s counterparts in Japan, DMG MORI and Okuma, tumbled due to unfavorable market conditions. MBK Partners eventually opted for an M&A amid foggy stock market prospects.
Doosan Machine Tools has delivered solid financial results over the past three years. In 2018, its consolidated operating profit surged 60 percent year over year to 238 billion won. Sales also rose 22 percent to 1.78 trillion won. Earnings have jumped fivefold and sales nearly doubled since its 2016 acquisition to MBK Partners.
Earnings before interest, tax, depreciation and amortization (EBITDA) amounted to 280 billion won last year, up 31 percent from 2017 and 70 percent from 2016. The anticipated EBITDA multiple, which is used to determine the potential value of a company, is 9-10x, putting Doosan Machine Tools’ valuation at 2.52-2.8 trillion won.
By Kang Woo-seok and Kim Hyo-jin
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