This year, the sale of Hanon Systems, which is considered the largest sale in the domestic M&A market, has begun in earnest. As it is a very large transaction with an expected price of over 10 trillion won, the M&A industry is drawing attention.
According to the investment banking (IB) industry on the 19th, Han & Company, a private equity fund (PEF) manager, appointed Morgan Stanley as the lead and entered the proceedings for the sale of Hanon Systems. It has been 7 years since Han&Company formed a consortium with Hankook Tire & Technology (Hankook Tire) in 2014 and acquired 69.99% of Halla Visteon Climate Control, the predecessor of Hanon Systems, for about 3.800 billion won by the U.S.
Hanon Systems is a company that manufactures air conditioners (heat management) such as automobile air conditioners. It ranks first with a 45% market share in the domestic market (as of 2019), and ranks second in the global air conditioning market. It is estimated that it generated 6.87 trillion won in sales and about 316 billion won in operating profit last year. Hanon Systems, a listed company in the securities market, has a market capitalization of about 9.34 trillion won based on the closing price of the day.
M&A experts predict that the value of the stake held by the Han & Company consortium will reach at least 8 trillion won. This is because the importance of the vehicle thermal management system is increasing due to the spread of electric vehicles. Some Korean conglomerates who are interested in global PEF and automotive electronics business are mentioned as candidates for acquisition.
LG Group, Hankook Tire, etc.
Volkswagen and Tesla also talked about candidates
Han&Company took over the hydraulic control business of Magna International in Canada for about KRW 1.4 trillion in 2018 and merged it with Hanon Systems to increase corporate value through a’bolt-on’ strategy. After the acquisition, more than 1.5 trillion won was invested in R&D, and eco-friendly technology development was also emphasized. Recently, it revealed a blueprint to secure more than 40% of the total sales in the eco-friendly sector and increase the number of eco-friendly car research personnel to more than 60%.
Securities prices predict that Hanon Systems’ pre-depreciation operating income (EBITDA) will reach about 1.2 trillion won this year. Considering that the value of the manufacturer’s company is usually formed at more than ten times the EBITDA, the total value of the company is also over 12 trillion won. Considering the stake in the Han&Company consortium, the sale price may exceed 8 trillion won.
Candidates for the acquisition are not only global automakers and parts makers, but also large information technology (IT) companies that have taken the automotive electronics sector as a new food item. In Korea, the concern is whether the LG Group, which is speeding up the vehicle electronics business, will participate. LG Group acquired ZKW, an Austrian automobile headlamp company, for about 1.4 trillion won in 2018 through LG Electronics and LG Co., Ltd. Last year, LG Electronics also established a joint venture (JV) with Magna, a global electronic parts maker.
In addition, Volkswagen and Tesla, an electric vehicle maker, who have announced plans to expand to the field of electric vehicles such as their own battery production, are also considered candidates. The global private equity fund (PEF), which holds trillions of won worth of microscopic funds (dry powder), is also expected to be of interest. There is a possibility that Hankook Tire & Technology Group, which holds priority purchase rights until June of this year, attracts financial investors (FI) and jumps into the takeover.
Reporter Joonho [email protected]
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