Private Equity Funds and Large Corporations Reunite... Wave of Restructuring Assets Floods Market

SK, Lotte, Hyosung, etc. Asset Efficiency and Business Structure Adjustment
Cooperation Model for Structural Improvement Expected with PEFs like KKR and IMM

The cooperative relationship between large corporations and private equity funds (PEFs), which had somewhat cooled following MBK Partners' hostile takeover attempt of Korea & Company Group (formerly Korea Tire Group), is thawing again this year. As major conglomerates such as SK, Lotte, and Hyosung begin full-scale business restructuring, PEFs have been brought in as partners for organizational reform.

According to the investment banking (IB) industry on the 12th, IMM Investment Group plans to actively invest in restructuring assets of large corporations like SK Group this year by utilizing two funds: IMM Private Equity's Rose Gold 5 and IMM Credit & Solution (ICS) Credit 1. Management rights acquisitions will be centered on Rose Gold 5, while minority equity investments will focus on Credit 1, with plans to establish project funds for co-investment.

In the M&A industry, SK Group is expected to be the most proactive in asset optimization efforts for fundraising.

SK Entum, the tank terminal business spun off from SK Energy, is considered an asset attracting interest from infrastructure investors. SK Geocentric (formerly SK General Chemicals) is also known to have been seeking to divest its NCC (Naphtha Cracking Center)-related business since last year.

Besides SK Group, a flood of restructuring-related assets from large corporate affiliates is anticipated this year. As Lotte Group’s core retail and chemical sectors face downturns, it has begun full-scale business restructuring starting with Seven Eleven. Lotte Group, together with global PEF Kohlberg Kravis Roberts (KKR), has initiated efforts to improve the business structure of Korea Seven, which operates Seven Eleven convenience stores.

Lotte is currently pushing for the spin-off and sale of Korea Seven’s ATM business division (formerly Lotte PS Net). Previously, in 2017, Lotte attempted to sell Lotte PS Net, a subsidiary of Korea Seven, but after facing difficulties, Korea Seven merged with Lotte PS Net in 2019.

It remains undecided whether KKR will take an equity stake in Korea Seven or invest via private loans. Previously, Lotte worked with MBK Partners during the sales of Lotte Card and Lotte Insurance.

In addition to Seven Eleven, Lotte Group is exploring various business restructuring plans. It has put five unprofitable Lotte Mart stores up for sale and is considering selling or leasing regional small- and medium-sized department stores. It is also expected to improve the group’s overall financial structure through the sale of less profitable golf courses and resorts.

Hyosung Group has begun full-scale preparations to sell its stake in Hyosung Chemical’s specialty gases division. The division is undergoing spin-off and investment attraction procedures. So far, the sale of a minority stake below 49% is considered likely, but the possibility of a management rights sale has also been mentioned. Credit funds such as ICS and Glenwood Credit are cited as major acquisition candidates. The market estimates the corporate value of Hyosung Chemical’s specialty gases business at around 1 trillion won. It mainly produces NF3, used to clean foreign substances in semiconductor manufacturing processes. It ranks third globally in production volume, following SK Specialty in first place and China’s Peric in second.

An IB industry insider hinted, "As business restructuring among large corporations like SK, Lotte, Hyosung, Taeyoung, and Shinsegae increases, funds will increasingly focus on deals emerging from these conglomerates."