Foreign capital dominates Korean M&A with ample funds and stronger USD vs KRW

Foreign capital has gone eagerly after parts of Korea Inc. up for sale to dominate the M&A scene so far in the year amid devaluation from the sharp rise in the U.S. dollar against the Korean won.

SK materials, a major specialty gas producer in Korea, recently signed a deal with Canada-based Brookfield Asset Management on selling its industrial gas production facility reportedly for over 1 trillion won ($767 million), according to industry sources on Thursday. The asset has attracted much attention for its stable profit structure since it was placed up for sale in the first quarter of this year. Strong competition from KKR and other global investment giants pushed up the final price.

Eco Management Korea Holding (EMK), a major Korean waste treatment service provider, is expecting Singapore-based Keppel Infrastructure Trust as its new largest shareholder after Korean shareholders IMM Investment and state-run Korea Development Bank signed an agreement to sell their stakes for about 770 billion won. Local environmental solution firm Ecorbit lost the deal as its bid fell 100 billion won short.

Classys, a non-surgical medical aesthetic device maker, had its largest shareholder replaced to Bain Capital from its founder Jung Sung-jae in April. Bain Capital, a multi-asset alternative investment firm giant based in Boston, offered 670 billion won for the stake. It previously had earned over 500 billion won through the buyout of Hugel, Korea¡¯s leading botulinum toxin maker.

Foreign capital has the advantage to bid more eagerly for the M&As of their desire due to the strong U.S. dollar versus the Korean won.

The Korean won that had averaged at 1,130 versus the U.S. dollar for the last decade came to average 1,250 this year as of Aug. 11. The three-month average was 1,290 won.

This means that an asset of 1 trillion won would have demanded $885 million last year but this year $775 million to save the M&A cost by more than 12 percent.

Multinationals also have the advantage of drawing funds at lower rates than Korean equity managers to position them better to win over deals.

More foreign wins may come with stake sales by Kakao Entertainment and KT Cloud in the offering.

[¨Ï Maeil Business Newspaper & mk.co.kr, All rights reserved]