이 기사는 2020년 02월 19일 08:00 thebell 에 표출된 기사입니다.

South Korea’s private equity (PE) firm STIC Investments sells its portfolio company Daesung Eltec.

According to investment banking (IB) industry sources on February 14, STIC Investments has begun the process for selling the country’s auto parts manufacturer Daesung Eltec. The PE firm has started its marketing towards potential buyers via its lead manager Deloitte Anjin.

Up for sale is a 55.5 percent stake in Daesung Eltec, which STIC Investments owns through its third blind-pool fund. It is not known yet whether a 10.79 percent stake that Daesung Eltec’s president Park Sang-kyu owns will also be up for sale.

STIC Investments is planning to spend plenty of time looking for its potential buyer that meets the PE firm’s conditions. A specific timeline for the sale process has not been set yet. The sale process is expected to be kicked off in earnest once the PE firm drafts a long list of potential buyers.

“STIC Investments is approaching to strategic investors from various angles for the sale of Daesung Eltec. As it already selected its lead manager, the sale process will start as soon as the PE firm forms a list of potential buyers,” said an IB industry insider.

Established 40 years ago, the local parts manufacturer suffered financial difficulty, before STIC investments invested 37 billion won in the company in 2013 by issuing new shares and convertible bonds. Daesung Eltec’s financial performance has improved and the PE firm has particularly focused on boosting the company’s enterprise value by liquidating its IT business.

Successfully reorganized business portfolio and secured new capital, Daesung Eltec has put more efforts into original development manufacturing (ODM) and technical development. Daesung Eltec, which recorded sales of 318.7 billion won and an operating loss of 21.9 billion won in 2013, made a turnaround in 2014 and recorded sales of 366.7 billion won and an operating profit of 5.7 billion won in 2016.

Potential buyers are likely to include the nation’s conglomerates who seek to enhance its automotive electric system business and information & communication technology (ICT) companies who have interests in autonomous driving. Market watchers view that Daesung Eltec is quite competitive in the field of autonomous driving, considering the company worked for a national development project related to autonomous vehicle in 2017 and acquired advanced driver assistance system (ADAS) company Verasys in 2018. Market is also likely to pay attention to whether foreign major strategic investors who have interests in autonomous driving technology will participate in the deal.

What is notable is that Dasung Eltec’s financial performance is showing a sign of losing its bullish steam. The company’s earnings have worsened lately amid a slowing domestic automotive industry. Daesung Eltec’s sales have recorded a small decrease over the last few years and its earnings before interest, tax, depreciation and amortization (EBITDA) is also trending down.

(By reporter Choi Ik-hwan)