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IMM Investment is being excluded from big deals in the waste management sector as sellers care about rivalry from a waste company owned by the private equity firm.

Affirma Capital, formerly Standard Chartered Private Equity, hired Citigroup Global Markets Securities and Standard Chartered Securities to lead the sale of its waste processor EMC Holdings. The seller will receive non-binding offers from potential buyers in the first round of bidding which will take place soon, sources said on June 3.

Multiple investors are said to be preparing their offers for EMC. Among them are domestic and foreign private equity firms, strategic industry investors and infrastructure funds.

The surging popularity of waste companies has been also observed in the bidding war for Korea Environment Technology (Koentec) and Saehan Environment owned by Macquarie Korea Opportunities Management (Macquarie PE). More than 10 investors took part in the first round of bidding in April and four bidders of them submitted binding offers last month. The seller will select the preferred bidder through progressive bidding.

“The waste management business is less cyclical than other sectors and has a high entry barrier, which contributes to generating stable profits,” an industry insider said. “Potential investors will likely pay more attention to EMC than Koentec as EMC operates water treatment facilities as well.”

IMM Investment, one of the potential buyers for EMC, reportedly has not been invited to make an offer. The private equity firm did not appear in the bidding process for Koentec and Saehan Environment either despite the likelihood that the firm would have a desire to build its portfolio of waste management businesses based on its investment in Eco Management Korea (EMK).

IMM Investment is pursuing to double EMK in size by bolt-on acquisitions. It bought EMK in 2017, which was followed by the waste company's acquisition of EMK Ulsan in the following year.

The private equity sellers seemingly wanted to avoid the risk of disclosing sensitive information to IMM Investment as it owns a rival of the target companies, industry watchers said. They are said to have been concerned about the possibility that IMM Investment could pull out of the bidding process after gaining key information about the companies.

“IMM Investment is expected to stick to a bolt-on strategy as deals are frequent in the waste management sector,” said the industry insider. “But EMK will likely focus on targeting small and mid-sized deals in the future, so it can take longer than expected for EMK to grow to the size it aims to be.”

(Reporting by Byung-yoon Kim)