Will Logen succeed in finding a new owner?
The M&A deal to sell Logen Logistics may take more time than previously thought, as the Korean parcel delivery firm’s stakeholder Baring Private Equity Asia (BPEA) currently undergoes Logen’s recapitalization — the process of restructuring a company’s equity and debt ratios to make its capital structure more stable — of 190 billion won ($159 million).
According to investment banking (IB) insiders, once the recapitalization process is completed, by next month at the earliest, negotiations with multiple bidders will be resumed to find the parcel delivery firm’s new owner.
“Logen is undergoing a recapitalization process that will be completed by August. Once the recapitalization is done, M&A deal negotiations will follow,” one source told The Korea Times.
The IB insider also dismissed reports over BPEA’s agreement with Well to Sea Investment for a stock purchase agreement (SPA) by the end of July, adding that there exist other bidders besides Well to Sea Investment are considering an M&A deal with BPEA.
Hong Kong-based BPEA purchased the nation’s fourth-largest parcel delivery firm back in 2013 for about 160 billion won from
Mirae Asset’s venture capital arm.
In 2016, BPEA came close to selling the firm to CVC Capital Partners yet the deal didn’t actually happen, even after an SPA was signed by the two parties. Since then, the Hong Kong-based private equity firm has had difficulty in unloading its holdings in Logen at its desired price.
Earlier this year, various conglomerates and equity firms, including Lotte Group, Shinsegae Group’s online shopping mall SSG. com, and JC Partners, showed an interest in the purchase deal either as strategic investors or financial investors.
However, no tangible progress has yet been made. Well to Sea Investment was also pursuing the deal, worth about 350 billion won. An official from Well to Sea Investment said negotiations between the two sides are ongoing.
Market watchers say one of the reasons for the difficulty in finding an M&A deal is Logen’s unique structure as its business is heavily dependent upon the volatile consumer-to-consumer (C2C) market. Although the firm is ranked as the country’s fourth-largest parcel delivery service, Logen’s market share was between 7 percent and 8 percent, and lags behind CJ Logistics, Hanjin Express and Lotte Global Logistics, which have solid strengths in the business-to-business (B2B) area.
“Due to the special structure of the parcel delivery industry, it’s not easy to make a significant value-up with the sole power of a financial investor. That’s why participation by influential strategic investors, who already have a stable business on their own, could boost the parcel delivery firm’s fundamental value,” an unnamed market watcher said.