Homegrown IMM PE successfully exits Tailim
Exit from Hollys Coffee mentioned as next step
IMM Private Equity (PE) has drawn keen attention from investors in the nation’s M&A market lately, after the homegrown private equity firm (PEF) clinched a series of large deals.
The PEF is set to sell Tailim Packaging and its subsidiary Tailim Paper to Sae-A for 700 billion won ($583 million), as the domestic clothing manufacturer was picked as the preferred bidder for the country’s largest paper and packaging products manufacturer.
In 2015, IMM PE acquired a 58.85 percent stake in Tailim Packaging and a 34.54 percent stake in Tailim Paper for 350 billion won, expecting growth in demand for paper and packaging products amid the increase in volume of parcel deliveries.
As it raised its stakes in the two companies afterwards, Sae-A will hold a 71 percent stake in Tailim Packaging and a 100 percent stake in Tailim Paper, after the deal is closed.
According to IMM PE, the recent deal is its second exit of buyout investment.
Although the PEF’s sale of domestic windshield wiper maker CAP in 2017 was its first exit of buyout investment, the latest deal is considered to be more important than the previous one, due to its size. The CAP deal failed to gain market attention, given that its size was below 100 billion won.
IMM PE attributed the recent success to its efforts to improve Tailim’s efficiency.
“As an individual founder took control of the company for 40 years, its corporate governance structure was inefficient as those of most medium-sized firms,” IMM PE managing director Jay Kim said. “Its 12 factories were buying raw materials separately, so most of its spending was unnecessary. We enhanced its efficiency through integrated management of the 12 factories.”
He also emphasized that the number of Tailim’s employees grew to 1,300 from 1,000 after IMM PE’s acquisition, contrary to common belief that severe restructurings follow PEFs’ acquisitions of companies.
Before clinching the recent deal, IMM PE signed a stock purchase agreement in March to acquire Linde Group’s Korean industrial gas business worth 1.3 trillion won.
It had a tight race with Macquarie Private Equity and Air Liquide to buy the Germany-based company’s local assets, including a gas plant in Giheung, Gyeonggi Province.
Market observers expect IMM PE will accelerate its efforts for fundraising, investments and exits, based on its recent achievements.
They mention exit from Hollys Coffee as the PEFs next step.
IMM PE, which bought a controlling stake in the coffee shop franchise for 45 billion won in 2013, failed to sell it in 2016, as it could not reach an accord in price negotiation with potential buyers.
Considering the coffeehouse chain’s recent performance improvement, it is expected to be sold at around 200 billion won.
“We don’t need to hurry, because we’ve already retrieved the amount we invested, thanks to the growing profitability,” Kim said. “I think we can expect a good opportunity within a few years.”