[Source: Doosan Machine Tools]
South Korea’s clothing manufacturer Sae-A Trading Co. is going after the whole ownership in Doosan Machine Tools costing up to 3 trillion won ($2.6 billion) as its cash-rich parent builds up portfolio from packaging and heavy industries through M&As
According to multiple sources from the investment bank industry on Thursday, Seoul-based North Asia’s biggest private equity group MBK Partners is in private talks with Sae-A on the sale of its portfolio company Doosan Machine Tools. Up for sale is entire stake in the leading manufacturer of turning centers held by DMT Holdings, a special purpose company of MBK Partners. The sale is expected to cost between 2.7 trillion won and 3 trillion won.
Doosan Machine Tools is Korea’s leading industry machine tool manufacturer. MBK Partners bought the machine tool business from cash-strapped Doosan Infracore for 1.13 trillion won in 2016. The buyout fund at the time set a goal to raise globally No. 5 Doosan Machine Tools as world’s top 3 players.
Under MBK Partners, Doosan Machine Tools saw its consolidated operating profit spring up from 47.6 billion won in 2016 to 148.4 billion won in 2017 and 237.9 billion won in 2018.
Growth stagnated in 2018 due to poor performance in China amid growing trade tensions between the United States and China.
Its revenue and operating income rebounded from the third quarter of last year amid revived infrastructure activity in China.
Demand from China, Europe, and the U.S. has turned up this year to result in record monthly orders in line with government-backed infrastructure projects to fight Covid-19 fallout.
According to market research agency Fortune Business Insights, the global machine tool industry is projected to grow at an annual average of 4.5 percent from $112.8 billion in 2019 to $151 billion in 2027.
Demand for machine tools has been on the rise across the industry.
Doosan Machine Tools is recognized for high value-added product computerized numerical control (CNC). CNC is a machine that is sought by companies in automobile, aviation, and energy sectors promoting fourth industrialization.
Sae-A Group led by Sae-A Trading became a big name on the M&A scene after it purchased top corrugated cardboard maker Tailim Paper Co. in 2019. The acquisition has created synergy in distribution and corrugated cardboard packaging sectors as Sae-A Trading expands presence as global apparel exporter based on its own brands Trugen, Joinus, and Compagna.
Sae-A Trading also bought STX Heavy Industries’ plant business to boost future growth engine. Its urge to add Doosan Machine Tools to its portfolio is also seen as a move to expand presence in heavy industries.
Sae-A Group is capable of international financing capacity based on its strong global business, said an unnamed official from the investment bank industry. It can afford Doosan Machine Tools, but it is premature to presume the deal will go through, he added.
Another bank source believes the two sides have made considerable progress in negotiations.
Sae-A Trading is expected to set up a special purpose company for the acquisition and seek financing from banks and brokerages.
By Kang Doo-soon, Jin Young-tae, Park Chang-young, and Lee Eun-joo
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