IMM enters China’s infrastructure market with $40 mn investment

  • 2020-04-24

IMM Investment Corp. has acquired a minority stake in China’s private water supplier for $40 million, in the first investment by a South Korean company in China’s infrastructure sector.

The purchase of the existing shares in United Water Corp. equates to an 8% stake in the Shanghai-based firm, valuing the entire company at around $500 million, according to investment banking sources on April 23. It was not immediately known from whom it had bought the shares.

IMM has made the investment via its seventh infrastructure fund of 200 billion won ($162 million), betting on the Chinese company’s growth not only in China but across Southeast Asia.

United Water is preparing to list A shares on the Shanghai stock market next year.

“The increased focus on private sector participation by the (Chinese) government for the development of the industry will create more opportunities for industry players like United Water,” IMM said in a statement on April 23, in reference to water treatment service.

An IMM source said that the Chinese company has been making stable incomes regardless of economic cycles because it provides water supply and waste water treatment services to general households.

It operates across 13 cities in nine provinces in China as one of the largest private water treatment companies in the country. Its operating profit margin before depreciation comes to 30%.

“It has high growth potential in smaller cities in China which are yet to be fully developed,” the source told the Korean Investors. “Its business expansion in Southeast Asia like Bangladesh is also inspiring.”

United Water signed its first international project in Bangladesh in 2019 for the development and operation of a water distribution network on a public private partnership.

“Through this partnership with IMM, United Water will also continue to strive to expand its operations both domestically and overseas,” United Water said in a separate statement on April 23.

With the stake purchase, IMM has secured one seat on the nine-strong board, according to a report from domestic news provider the Bell.

In 2015, International Finance Corporation (IFC) of the World Bank and Olympus Capital Asia from the US participated in a new equity financing round of United Waters. The amount of their investments was not disclosed.

IMM has been actively seeking opportunities in the Asian infrastructure market, since the IFC’s former Asia infrastructure and resources director Hyun Chan Cho joined the Seoul-based investment firm in 2019.

It will continue to seek additional opportunities in water treatment and infrastructure in China as well as expand its business in other Asian countries, IMM said in the statement.

Currently, IMM Investment is managing 33 funds with capital commitment of about $4 billion in total and $1.2 billion in infrastructure.

For cross-border portfolio, it participated in a $470 million investment for a minority stake in Vietnam’s Masan Group led by South Korea’s SK Group in 2018. The National Pension Service also participated as a co-investor.

By Jung-hwan Hwang

Jung@hankyung.com

<Edited by Yeonhee Kim>

(Photo: Getty Images Bank)