이 기사는 2021년 07월 26일 08:04 thebell 에 표출된 기사입니다.

Hoban Construction has joined a race with two other strategic investors to acquire Doosan Machine Tools, which have been seen as a potential candidate for sale in the market for the last two years.

Hoban Construction and two other potential buyers, Sae-A Trading and DTR Automotive, are separately in talks with private equity firm MBK Partners to buy Doosan Machine Tools, industry sources said on Thursday.

Hoban Construction has been active in the South Korean M&A market in recent years as it steps up efforts to diversify its business through strategic acquisitions. Most recently it acquired cable maker Taihan Electric Wire earlier this year. But some observers question whether the construction firm is serious about buying the machine tool maker given its history of frequently withdrawing from deals.

Hoban Construction retains a strong cash position for acquisitions, which makes it the most likely candidate to win the race. Its cash and cash equivalents were 1.36 trillion won ($1.18 billion) on a non-consolidated basis and 1.74 trillion won on a consolidated basis at the end of 2020, with a low debt ratio of 33.7% and 53.0% respectively.

Sae-A Trading made itself known in the M&A market with the acquisition of Tailim Packaging in 2019. The clothing maker has strong cash generation ability, but it had cash and cash equivalents of only 69 billion won at the end of 2020. It also had a high debt ratio of 189%, which could limit the company’s ability to raise financing.

DTR Automotive manufactures auto parts such as batteries and anti-vibration rubber. The Kospi-listed company reported revenue of 823.9 billion won and earnings before interest, taxes, depreciation and amortization (EBITDA) of 111.6 billion won in 2020. Its cash and cash equivalents were 168 billion won at the end of 2020 with a debt ratio of 46.9%.

MBK Partners acquired Doosan Machine Tools for 1.13 trillion won in 2016. It attempted to make a partial exit in 2018 through an initial public offering but decided to drop the plan because of tough market conditions.

Since then, MBK Partners have been approached by many potential buyers. In June 2019, the firm received offers through a limited auction process, with several global private equity firms – including Brookfield Asset Management, Bain Capital and Baring Private Equity Asia – bidding for the company.

Doosan Machine Tools generated EBITDA adjusted for non-recurring items of $251 million, according to information packages provided to potential buyers in 2019. MBK Partners reportedly wanted to sell it for about 3 trillion won, equivalent to nine times EBITDA. But potential buyers’ offers were in the 2 trillion won range, and no deal was struck.

Aju Group, whose mainstay business is building materials, also approached MBK Partners in 2020 about the acquisition of Doosan Machine Tools. But they couldn’t reach an agreement.

MBK Partners already collected more than its invested capital through recapitalization. At the time of the acquisition, the firm funded about 660 billion won through acquisition financing. In 2018, it conducted a first recapitalization involving a 1.15 trillion won new loan and a capital distribution worth more than its invested capital. In 2020, the firm collected an additional 500 billion won in a second recapitalization in which a 1.4 trillion won new loan was taken out.

Doosan Machine Tools’ financial performance has been in decline in recent years partly due to the impact of the US-China trade war and the Covid-19 pandemic. The company recorded EBITDA of 142.5 billion won on revenue of 1.22 trillion won on a consolidated basis in 2020, down from EBITDA of 280 billion won on revenue of 1.78 trillion won in 2018. (Reporting by Hee-yeon Han)