[Exclusive] IMM CS to Recap 40% Stake in SK Enmove in First Half... This Year's Keyword 'EXIT'

Major Large PEF Portfolio Companies Up for Sale
Market Awakens After 2-Year Slump as an 'Opportunity'
Jenuwon Science, F&Net, and Others 'In Focus'

Since the beginning of this year, large private equity fund (PEF) managers have been accelerating the sale of major portfolio companies they hold. As the capital market, which experienced severe stagnation over the past two years, begins to stir again, frontline PEFs are the first to move for investment recovery.

According to the investment banking (IB) industry on the 6th, IMM Credit & Solutions (IMM CS), a financial investor (FI), is pushing for a 40% recapitalization of SK Inovation’s subsidiary SK Enmove (formerly SK Lubricants).

Recapitalization, short for Leveraged Recapitalization, refers to a method by which PEFs recover their investments through equity conversion, leverage, dividends, and other forms. IMM CS plans to proceed with the recapitalization of SK Enmove’s shares within the first half of this year.

An IB industry insider hinted, "Following last year’s minority stake sale of Airfirst, IMM Investment Group is expecting significant results again this year with SK Enmove and Genewone Science."

SK Enmove is the world’s number one company in the premium lubricating base oil sector. IMM CS acquired a 40% stake in SK Enmove for 1.1 trillion KRW in 2021, making it the second-largest shareholder after SK Innovation (60%). Five years ago, SK Enmove attempted an initial public offering (IPO) under the name SK Lubricants but withdrew after a poor demand forecast. Since then, it abandoned its identity as an oil refining company and focused on producing lubricants essential for electric vehicles. It has now grown into a company with annual sales exceeding 6 trillion KRW and operating profits over 1 trillion KRW.

IMM Private Equity (IMM PE) is currently in the process of selling Genewone Science. This company was established after IMM PE acquired the pharmaceutical business division of Kolmar Korea and its subsidiary Kolmar Pharma in 2020, forming a bio contract development and manufacturing organization (CDMO). IMM PE invested a total of 512.4 billion KRW in Genewone Science through its 4th blind fund (a fund raised without predetermined investment targets) and borrowings. The expected sale price is reported to be up to around 1 trillion KRW.

In addition, other large PEs are actively moving to sell portfolio companies one after another this year. UCK Partners is pushing for the sale of the controlling stake in F&D Net, a comprehensive distributor of health functional products. The company’s flagship products include Lockpido (probiotics) and Dr. Moms (prenatal supplements). F&D Net’s products are sold in over 6,500 hospitals and pharmacies, and it operates shop-in-shops in 150 major hospitals nationwide. UCK acquired an 80% stake in F&D Net for about 70 billion KRW through its 1st blind fund in 2017.

VIG Partners is conducting the sale of Freed Life, the number one funeral service company in Korea. The recent preliminary bidding involved three strategic investors (SI) and three financial investors (FI). The acquisition candidates have now entered the due diligence phase. The sale target is approximately 75% of Freed Life’s voting shares (excluding 25% treasury shares). The sale is structured to bundle shares held by VIG Partners (58%), Marsten Partners (7.5%), and TS Investment (5.16%). The expected acquisition price is reported to be in the mid-1 trillion KRW range. VIG Partners invested about 400 billion KRW in Freed Life. If the sale is completed in the 1 trillion KRW range, the investment profit is expected to be 3 to 5 times.

Praxis Capital is pushing for the sale of controlling shares in BusinessOn, a comprehensive electronic contract platform. The sale target is 46.91% of shares, with the sale price including a control premium expected to be between 250 and 300 billion KRW. BusinessOn, established in 2007, is a leading domestic electronic tax invoice company, known for its tax invoice service 'SmartBill,' used by over 4.5 million businesses.

After acquiring control of BusinessOn in 2019, Praxis Capital conducted bolt-on mergers and acquisitions by acquiring Glosign, an electronic signature service provider, and Planit Partners, a data analytics service provider, in 2020. In 2021, it acquired Nudge Partners, a financial solutions provider, and in 2022, Shiftee, an HR solutions company. Recently, Naver attempted to acquire a specific business division of BusinessOn but withdrew its offer after failing to reach an agreement with Praxis, which wanted to sell the entire company.

JKL Partners is pushing for the sale of Lotte Non-Life Insurance. JKL invested about 730 billion KRW in Lotte Non-Life Insurance, securing a 77% stake through a 373.4 billion KRW purchase of existing shares and approximately 356.2 billion KRW participation in a rights offering in 2019. JKL agreed to use the Lotte brand for five years upon acquisition. The acquisition financing matures this year. JKL plans to sell Lotte Non-Life Insurance within the year and actively recover its investment.

Additionally, MBK Partners has taken intensive steps for investment recovery, including appointing Vice Chairman Kim Kwang-il as CEO of Homeplus. This is the first time an MBK representative has entered the CEO position at Homeplus. It is interpreted as internal restructuring in preparation for the successful sale of Homeplus next year. Homeplus’s investment maturity reaches 10 years next year.

Han & Company is also driving the sale of its long-term portfolio company Ssangyong C&E. Although Han & Company is evaluated to have increased future value by establishing eco-friendly facilities during its holding period, it has not yet realized gains due to market stagnation. Han & Company plans a public tender offer and delisting of Ssangyong C&E. An IB industry insider explained, "Instead of voluntarily delisting by acquiring 95%, if more than 66.7% is held, delisting is enforced through a comprehensive stock exchange." Comprehensive stock exchange is a legal system under the Commercial Act where, through a stock exchange agreement between companies, all issued shares of a subsidiary are transferred to the parent company, and subsidiary shareholders receive new shares of the parent company. Once the stock exchange is completed, delisting proceeds in consultation with the stock exchange.