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Unsuccessful bidders for UDC may turn to Hyosung Capital Similarities exist between two financial firms

Translated by Ryu Ho-joung 공개 2020-06-26 08:00:27

이 기사는 2020년 06월 26일 08:00 더벨 유료페이지에 표출된 기사입니다.

Foreign prospective bidders for South Korea’s Hyosung Capital will likely use Shinsei Bank’s recent acquisition of New Zealand’s UDC Finance as a reference due to the similarities between the two financial services firms, sources said on June 24.

Australia and New Zealand Banking Group (ANZ) earlier this month announced that it agreed to sell its non-bank financing firm, UDC Finance, for NZ$762 million ($480 million) to Japan’s Shinsei Bank.

The purchase price represents a price-to-book ratio of 1.2 times net tangible assets at the end of March. Shinsei Bank beat notable contenders such as Apollo Global Management and Cerberus Capital Management in the bidding race.

UDC Finance and Hyosung Capital have several things in common, industry watchers said. They both specialize in equipment loans and have a similar level of net assets. UDC Finance’s borrowing costs are also similar to those of Hyosung Capital.

Many of foreign potential bidders for Hyosung Capital are said to have shown an interest in buying UDC Finance, which raised Hyosung Group’s hopes that its asset finance business could also be priced at a valuation multiple used in the UDC Finance deal. The conglomerate is seeking a valuation of about 416 billion won ($345 million), which represents a price-to-book ratio of roughly one time.

Hyosung Capital could be attractive to foreign investors because the country’s equipment loans market is larger than that of New Zealand and also the deal is not subject to domestic regulatory approval. But factors such as the firm’s distressed assets and domestic potential buyers being less enthusiastic about the target could drag the sale price down, industry watchers said.

“UDC Finance can serve as a reference to potential buyers for Hyosung Capital. But the seller needs to be able to clearly justify the valuation,” an industry insider said.

The first round of bidding for Hyosung Capital has recently been delayed two weeks to around July 10 to give foreign investors, which are having difficulties conducting due diligence due to Covid-19 travel restrictions, enough time to prepare their offers.

China’s Ping An International Financial Leasing and some strategic investors from Japan and Australia are among prospective bidders for the firm, along with several private equity firms in the country.

Hyosung Group needs to complete the sale of Hyosung Capital by the end of December to comply with local regulations that forbid a non-financial holding company from owning a stake in a financial services company. The bidding process is expected to take at least four months.

(Reporting by Ik-hwan Choi)
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