Baring Private Equity Asia has named CVC Capital Partners as the preferred buyer of South Korea’s No.4 parcel delivery company, which the Carlyle Group and Affinity Equity Partners were also vying for, in a deal estimated to be at the lower end or mid-range of 300 billion won ($270 million), investment banking sources said on Sept. 12.
CVC had shown the strongest interest among bidders in Logen Co. Ltd. from the early stage of the auction, and was the most aggressive in expressing its interest after the first round of the auction collapsed last June over a price difference, according to the sources.
The transaction of the unlisted parcel delivery firm will mark the first acquisition spearheaded by Steve Lim, chairman of Korea of CVC, after he moved to the Europe-based private equity firm last September from J.P. Morgan where he served 20 years.
The price tag of the deal was lower than the 400 billion won range initially sought by Baring PEA. Still, Hong Kong-based Baring will likely make a profit from the exit, after it spent about 200 billion won in acquiring 100% of Logen and a majority stake in a smaller, debt-ridden Korean parcel delivery company, KGB LOGIS Co. Ltd. Now Logen controls 76% of KGB which posted losses in the past three years, according to their annual reports.
“Unlike the selling side, bidders had doubt about the sustainability of the agent-based business model (of Logen),” one of the IB sources told the Korea Economic Daily. “In addition to concerns about KGB LOGIS’ performance, the fact that the two companies have yet to make an organic integration seems to serve as a factor that drove down the price.”
CVC is set to sign a share purchase agreement with Baring during this week.
Baring PEA put the unlisted parcel delivery company up for sale earlier this year. But the first round of the sale process fell through, after all three shortlisted bidders DHL, UPS and a South Korean private equity house walked away from the deal last June due to a price gap. In the second round of the auction, only financial investors – CVC, Carlyle and Affinity Equity – participated. The three private equity firms conducted due diligence on Logen simultaneously.
In contrast to bigger South Korean parcel delivery firms under large business groups, Logen does not have its own logistics infrastructure, but charges fees for matching transport companies with individual businessmen involved in parcel delivery services. It posted an operating profit of 25.8 billion won against sales of 351.3 billion won last year. The earnings represented a jump of 25% and 33% from a year earlier, respectively, as soaring online shopping has been boosting demand for parcel delivery services.
The transaction was managed by J.P. Morgan, where CVC’s Lim earned the reputation as South Korea’s first-generation investment banker and served as managing director in Seoul. CVC awarded him a seat in its investment committee, one of only four seats available for the company globally, along with a title of a global partner. In South Korea, CVC has also joined the race to buy Tongyang Magic, a home appliance maker.
By Soram Jung and Chang Jae Yoo
<Edited by Yeonhee Kim>