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This year, the sale of Hanon Systems, which is considered the largest sale in the domestic M&A market, has started in earnest. As it is a very large transaction with an expected price of more than 10 trillion won, the M&A industry is attracting attention.
According to the investment banking industry (IB) on the 19th, Han & Company, a private equity fund manager (PEF), named Morgan Stanley as a leader 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 around 3.8 billion won by US Visteon Group.
Hanon Systems is a company that manufactures air conditioners (heat management) like car 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 publicly traded company, has a market capitalization of approximately 9.34 trillion won based on the closing price of the day.
Mergers and acquisitions experts predict that the value of the Han & Company consortium stake will reach at least 8 trillion won. This is because the importance of the vehicle’s thermal management system is increasing due to the expansion of electric vehicles. Some Korean conglomerates that are interested in the global PEF and automotive electronics business are mentioned as candidates for the acquisition.
LG Group, Hankook Tire, etc.
Volkswagen and Tesla also spoke of candidates
Han & Company took over Magna International’s hydraulic control business in Canada for approximately KRW 1.4 billion in 2018 and merged it with Hanon Systems to increase corporate value through a ‘bolt’ strategy. After the acquisition, more than 1.5 trillion won was invested in R&D, and the emphasis was also on green technology development. Recently, it unveiled a plan to secure more than 40% of total sales in the green sector and increase the number of green car research staff to more than 60%.
Securities prices predict that Hanon Systems’ operating income before depreciation (EBITDA) will reach around 1.2 trillion won this year. Considering that the value of the manufacturer’s company is usually made up of more than ten times EBITDA, the total value of the company of more than 12 trillion won is also mentioned. Taking into account the stake in the Han & Company consortium, the sale price can exceed 8 trillion won.
Candidates for the takeover are not just global auto and parts manufacturers, but also large information technology (IT) companies that have taken the automotive electronics sector as a new food. In Korea, the concern is whether the LG Group, which is accelerating the vehicle electronics business, will participate. LG Group acquired ZKW, an Austrian car headlight company, for approximately 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 manufacturer of electronic components.
Additionally, Volkswagen and Tesla, an electric vehicle maker, which has announced plans to expand into the electric vehicle field, including its own battery production, are also among the candidates. The global private equity fund (PEF), which has trillions of won in microscopic (dry powder) funds, is also expected to be of interest. There is a possibility that Hankook Tire & Technology Group, which has priority purchase rights until June this year, will attract financial investors (FI) and move into the acquisition.
Reporter Joonho [email protected]
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