PEFs hit a snag with investment exit plans due to latest stock market rout

2022.06.17 13:46:59 | 2022.06.20 17:33:32

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Private equity firms that have been seeking to cash out their investments in South Korean firms have hit a snag with their exit plans due to the latest stock market rout from growing recession fears amid runaway inflations and interest rate hikes.

Shares of Hanon Systems are nearly halved from its 52-week high of 18,850 won ($14.62) to 9,730 won as of Friday. The plunge in its stock price is a big headache to Hahn & Co, a private equity firm standing as the largest shareholder of Hanon Systems.

Hanon Systems, based in Korea, is the world’s second largest supplier of automotive thermal and energy management solutions. Hahn & Co. has been seeking to sell its 50.5 percent stake in Hanon Systems, along with 19.49 percent held by Hankook Tire & Technology Co. for up to 8 trillion won. They have been tapping buyers since the first quarter last year.

But its stock price has rapidly lost in the face of global automakers’ production disruptions from the prolonged chip shortages and rising inflation. The company saw its operating income plunge 70 percent to 30.4 billion won in the first quarter versus a year ago.

If the current situation continues, the seller should consider cutting the asking price or postponing the sale schedule, said a market observer.

The bear market would also delay IMM Private Equity’s exit from Korea’s largest furniture and interior company Hanssem. The PEF acquired Hanssem for 1.45 trillion won in January, but shares of Hanssem are currently hovering around 65,000 won, more than halved from about 140,000 won in July last year when the PEF negotiated the deal price.

Hanatour Service, Korea’s largest travel agency, in which IMM Private Equity holds stake, has also nosedived, with its share price at 63,500 won as of Friday morning versus 90,000 won in April.

Keistone Partners and Daishin Private Equity have their exit schedule delayed after SK shieldus, in which they invested 125 billion won in 2018, recently withdrew its initial public offering plan. H&Q Korea Partners will also likely push back its exit from e-commerce platform 11st.com, which reportedly is having a second thought on going public in the second half this year due to sour investor sentiment.

By Park Chang-young and Cho Jeehyun

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