A consortium of LK Investment Partners and Hanil Cement Co. won the priority right to negotiate the deal to acquire Hyundai Cement Co. after they are said to have made a higher-than-expected offer of around 650 billion won ($567 million), according to sources.
Sales advisors Korea Development Bank, Samil PricewaterhouseCoopers and Hana Financial Investment Co. announced on Thursday that they have picked the consortium of LK Investment Partners and its strategic partner Hanil Cement as a preferred bidder to take over an 84.56 percent stake in Hyundai Cement.
When the deal is completed, the country’s No. 2 cement maker Hanil Cement would rise to the top in the cement industry by boosting its market share from current 20 percent to more than 30 percent. Hyundai Cement is the sixth largest cement maker with around a 10 percent market share.
The deal has drawn six contenders, including IMM Private Equity, Ssangyong Cement Industrial Corp., Halla Cement Corp., PineStreet Group and Hyundai Sungwoo Holdings Co. Market experts have expected that Ssangyong Cement Industrial and Halla Cement would lead the buyout, but they reportedly suggested around 500 billion won, much lower than LK Investment’s offer. IMM PE that is known to have competed neck and neck with LK Investment lost the race at the last minute with just 20 billion won less offer, according to sources.
Given the Hyundai Cement’s closing price of 29,000 won and market capitalization of 486 billion won on Thursday, the 84.56 percent stake is worth around 410 billion won. This suggests that LK Investment Partners and Hanil Cement offered about a 60 percent premium over the company’s market capitalization. Analysts had predicted the sale price would not reach above 600 billion won including management premiums.
“Partnering with Hanil Cement must have allowed LK Investment to come up with a concrete plan to enhance the corporate value, enabling it to make the bold offer," said a source from the industry.
Creditors of Hyundai Cement aim to sign a stock transaction contract with LK Investment Partners next month and conduct due diligence to finalize the deal in May.
On Friday, shares of Hanil Cement jumped 7.0 percent, or 5,600 won, to end at 85,900 won in Seoul trading while those of Hyundai Cement closed down 3.6 percent, 1,050 won, at 27,950 won.
By Kang Doo-soon and Hong Jang-won
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]