KG ETS taps buyers for its lucrative waste treatment business

Kosdaq-listed KG Eco Technology Services (ETS) Co. is selling its core waste management business to raise capital to tap into new businesses.

KG ETS is set to send teaser letters within this week, according to sources from the investment banking industry on Wednesday. The company will separate and sell the environment and energy business. EY Hanyoung is leading the spinoff and sale. They plan to hold a preliminary tender in mid-November.

KG ETS was founded in 1999 with investment from French waste management company Veolia Environment S.A. and was sold to KG Group in 2010. It engages in not only household and industrial waste processing business but also energy, new material and bio business. KG Chemical is its largest shareholder with a 46.3 percent stake.

Shares of KG ETS finished Thursday unchanged at 16,250 won.

The waste treatment business represents more than 90 percent of the company’s sale and operating profit. It has strong competitiveness in the industry as the nation’s first company to utilize heat and steam produced by incinerating wastes for power generation. Its incineration facility is located in Siheung, just 12 kilometers away from Seoul, giving easy and fast access to clients.

Industry officials close to KG group suggest it is selling the business to capitalize on the growing value of the waste processing industry to use the sale proceeds to invest in other areas. A market source said the group is reviewing strengthening its steel business and entering new businesses by selling the waste treatment division when the demand is strong.

The sale can draw interest from constructors and private equity funds (PEFs) at home and abroad, according to sources. Taeyoung Group has emerged as a strong candidate as it owns TSK Corp., the country’s No.2 water treatment business and No.1 landfill business operator.

SK Ecoplant which bought the country’s biggest waste treatment platform provider EMC Holdings for 1.05 trillion won ($886 million) last year could be another potential buyer. It has been reorganizing its business structure by scaling down plant business and expanding waste business. It has also formed a fund to invest in the eco-friendly industry with LX Investment and IBK Capital.

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