BlackRock takes stake in AirFirst with unique growth strategy

[Courtesy of AirFirst]

AirFirst Co., a South Korean industrial gas company, attracted attention in the investment banking industry early this month for successfully raising 1.11 trillion won ($845 million) from BlackRock Asset Management, the world’s largest asset management firm.

The majority shareholder of AirFirst, IMM Private Equity (PE), sold just 30 percent of its stake in AirFirst, which it acquired four years ago for about 1 trillion won, and recouped more than its original investment.

Amid declining interest in alternative investment markets due to rising interest rates, it is exceptional for a minority stake without managerial control to be sold with an annualized internal rate of return (IRR) of 39 percent.

The enthusiasm for AirFirst was evident from the preliminary bidding in March, which attracted more than a dozen Korean and foreign strategic investors and financial investors. IMM PE shortlisted only global asset managers such as BlackRock Asset Management, Kohlberg Kravis Roberts (KKR), Brookfield Asset Management and CVC Capital.

A potential bidder offered to invest up to 2 trillion won in exchange for a 50 percent stake. The idea was that it would co-manage AirFirst with IMM PE and take a more aggressive approach to value enhancement. For IMM PE, this was a viable option for a stable exit, given the uncertainty of how the investment market would evolve in the future.

However, IMM PE ultimately decided to give BlackRock a 30 percent non-controlling stake. The reasoning behind the decision was to accelerate AirFirst’s planned international expansion. IMM PE determined that it was not the time for co-management to gather diverse opinions, but for the existing majority shareholder to make a quick decision.

BlackRock has more than 13,000 trillion won under management and is a shareholder in major companies around the world, which is expected to provide leverage for AirFirst’s global expansion. BlackRock also holds more than 5 percent stakes in Samsung Electronics Co. and Samsung Life Insurance Co., which may play a role in developing a relationship with Samsung, a major customer of AirFirst.

In the four years since its acquisition, IMM PE has revolutionized AirFirst, attracting interest from some of the world’s leading fund managers. In 2019, the company acquired the Korean business of Germany’s Linde, which it turned into a standalone company through an intensive post-acquisition integration (PMI). Since then, AirFirst has strengthened its business development team, established a construction subsidiary, AF E&C, and won a project for Samsung Electronics’ Pyeongtaek plant. The company’s clients have diversified to include Seah CM, DB Hi-Tech, POSCO Future M, Umicore, Wonik Holdings, and TEL. New orders also came from existing customers such as Samsung Electronics and SK Hynix Inc.

As a result, AirFirst’s earnings before interest, taxes, depreciation and amortization (EBITDA) rose to 142 billion won last year from 104.3 billion won in 2019. During the same period, revenue more than doubled to 603.1 billion won from 268.9 billion won. The company’s position in the South Korean industrial gas market, which was fourth or fifth before the acquisition, jumped to second place last year.

AirFirst is aiming to win the gas equipment contract for Samsung Electronics’ U.S. semiconductor plant later this year.