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June 07, 2020

Korea's proposed M&As shrink to half in Q1

PUBLISHED : April 02, 2020 - 15:55

UPDATED : April 02, 2020 - 18:17

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The volume of proposed mergers and acquisitions in South Korea has shrunk to about half in the first quarter of 2020, reflecting the impact of the novel coronavirus, data showed Thursday.

The first quarter saw 5.23 trillion won ($4.22 billion) worth of deals announced, falling 50.6 percent on-year, according to a league table by news outlet thebell.

This comes as the coronavirus pandemic is causing delays in reaching agreements between parties due to market uncertainties.

Major deals announced in the first quarter include SK Networks’ proposed 1.33 trillion won in the sale of fuel retailer operations and gas stations to a consortium made up of Hyundai Oilbank and Koramco REITs Management & Trust in March.

Private equity firms also played a central role. Seoul-based Hahn & Co. in February proposed to buy SK Chemical’s biofuel operation for 382.5 billion won, while Hong Kong-based Anchor Equity Partners bought 12.9 percent of Kakao M in newly issued shares for nearly 209.8 billion won.

Notable overseas deals include a deal worth 155.6 million euros ($170.3 million) by a European unit of Hyundai Capital to buy German auto lender Sixt Leasing.


The volume of deals closed in the first quarter, however, has changed little compared to a year prior. The total transaction came to 14.57 trillion won.

Of the 89 deals, trillion-won transactions include Macquarie PE’s 2.5 trillion-won acquisition of Daesung Industrial Gases from MBK Partners, Netmarble’s 1.74 trillion-won Coway stock purchase and SKC’s 1.2 trillion-won takeover of KCF Technologies from KKR & Co.

But the trend is unlikely to continue, as the novel coronavirus fallout is now posing hurdles to ongoing mergers and acquisitions talks.

According to disclosures in the past week, Korean firms are canceling M&A deals or delaying payments as the pandemic intensifies.

Especially for cross-border deals, border restrictions are postponing deals from closing.

JB Financial Group said in a filing Tuesday that its subsidiary Kwangju Bank’s plan to buy the entire stake of Morgan Stanley Gateway Securities for 19.5 billion won was delayed due to Vietnam’s visa restrictions imposed in the wake of the COVID-19 pandemic.

Also, auto part maker Seoyon E-Hwa’s plan to offload its 30 percent stake in its Indian subsidiary was postponed to April, as India’s Registrar of Companies office has been shut down on the nation’s complete lockdown.

In the domestic market, Hanchang canceled a plan to acquire Vitzrosys, while auto part maker GSC Korea withdrew its 34.35 billion won acquisition of Yuyang D&U. Cosmetics goods maker Coson walked away from Outin Futures acquisition plan.

“The sharp economic downturn will be reflected in price negotiations between buyers and sellers in the short term, so the deal talks will drag on,” said a head of Korean private equity firm on condition of anonymity.

"Buyers will try to reflect the target’s performance in the first half of 2020 in their valuation, while sellers will go on slowly in an abnormal situation.”

By Son Ji-hyoung (consnow@heraldcorp.com)

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