M&A deals dragging on

Merger and acquisition deals in Korea, previously expected to flourish thanks to industry-wide corporate restructurings, are actually dragging on due to little interest from potential buyers, industry sources said Tuesday.

Early in January, mobile messaging app operating giant Kakao Corp.’s 1.87 trillion won ($1.57 billion) acquisition of Loen Entertainment, the top operator of online music in the local market, was expected to prompt the M&A market later this year.

However, major deals that draw keen interest in the market have failed to progress further.

Most recently, state-run Korea Development Bank’s attempt to sell its subsidiary KDB Capital failed again, as only one bidder participated in the final bidding which did not result in a binding competition.

In the preliminary bidding in March, U.S. private equity giant Carlyle, a private equity firm set up by SK Securities and a nonfinancial company based in Korea were selected as the three suitors.

The policy bank failed to sell its 99.92 percent stake in KDB Capital in November last year due to lack of interest from potential bidders.

Carlyle is also struggling to sell Korea’s textile manufacturer Yakjin Trading, although local buyout firm STIC Investments and U.S. private equity Texas Pacific Group and other strategic investors showed interest in a preliminary bidding held by JP Morgan in late January.

The potential buyers started to press the brakes on due diligence in February, seemingly dissatisfied with the company’s growth potential or the seller’s asking price, sources said.

Carlyle bought 100 percent stake in Yakjin for 204.8 billion won in 2013.

Hong Kong-based Baring Private Equity Asia and deal manager JP Morgan failed to plan for a final auction schedule to sell Logen Logistics, Korea’s fourth largest package delivery firm, since selecting three bidders -- two global courier giants DHL and UPS and Korea’s STIC Investment -- as suitors in March.

Logen Logistics was initially put up for sale late last year but the sales process did not go smoothly due to the lack of interest from local conglomerates such as Hyundai Department Store.

Talks over the sale of Kim’s Club between E-Land Group and its preferred bidder KKR are still ongoing due to differences over price.

While E-Land Group wants about 700 billion won for the retail chain with its 37 outlets, its preferred bidder KKR is pushing to slash the price by about half, local news reports said. Some speculated the group might try to sell only part of Kim’s Club to the buyout firm and repurchase it later.

Meanwhile, the number of announced M&A deals targeting Korean companies marked 549 in the first half of this year with the volume reaching $27.1 billion, according to data by M&A information provider Dealogic. In 2015, the number of deals stood at 1,224 with a volume of $100.6 billion.

By Kim Yoon-mi (yoonmi@heraldcorp.com)