이 기사는 2020년 03월 11일 08:00 thebell 에 표출된 기사입니다.

Industry watchers are paying keen attention to South Korea’s waste disposal firm EMC Holdings (EMC) whether the sale of the firm may be the big ticket deal of the domestic waste disposal sector.

Affirma Capital has put EMC for sale and selected firms to handle the sale process, according to industry sources on March 6. The environment and waste company is expected to send out teaser letters and announce the sale in mid-March.

Market watchers estimate the value of EMC at around one trillion won. The company recorded sales of 345.3 billion won and EBITDA of 65.1 billion won as of the end of 2018. The company is likely to have posted sales of 380 billion won and EBITDA of 82.2 billion won in 2019. The firm’s normalized EBITDA may be higher than this.

Multiples that have been paid for latest buyout transactions in the sector are around 10 times. WIK Green was sold at EV/EBITDA multiple of 11~12 times last year while Changwon Enertech was sold at EV/EBITDA multiple of 12.7 times. Daewon Green Energy was sold at EV/EBITDA multiple of around 15 times in 2018.

Based on its estimated EBITDA of 2019, the value of EMC is likely to be between 986.4 billion won and 1.069 trillion won when EV/EBITDA multiple of 12~13 times is applied. As of the end of 2018, EMC has net borrowing of 124.6 billion won. Assuming there hasn’t been a significant change in the amount of debt over the past 12 months, the valuation of EMC is estimated at between 861.8 billion won and 944 billion won.

Affirma Capital has decided to sell EMC as several global infrastructure funds have recently shown interests to buy the company. Some funds reportedly have suggested a valuation of more than one trillion won. However, given multiples that have been paid for latest buyout transactions, the valuation of EMC is expected to be lower than one trillion won.

If signed, the sale of EMC will be the landmark deal in the domestic waste disposal sector. Despite rising in the number of M&A deals in the sector over the past 10 years, the sizes of the deals have been mostly small.

Macquarie Korea Opportunities Management (Macquarie PE) put five waste disposal companies including WIK Green up for sale at the beginning of 2019. Among them, WIK Green was sold at 75 billion won and the remaining four (WIK Gyeonggi, WIK Joogbu, WIK Environment and Yongshin Industrial Development) were sold at 82 billion won. In June 2019, SG Private Equity and SKS Private Equity acquired Changwon Enertech for around 66 billion won and E&F Private Equity purchased Daewon Energy Green for 20 billion won in 2018.

Major PE firms that have been actively investing in environment and waste companies include Affirma Capital, Macquarie PE, IMM Investment and Anchor Equity Partners. The PE firms have continuously acquired companies in the sector mostly through bolt-on acquisitions, while individual deal size hasn’t been large.

IMM Investment acquired a 100 percent stake in Eco Management Korea (EMK) for 390 billion won in 2017 from JP Morgan, which set the record for the largest transaction in the domestic environment and waste industry.

In 2016, Affirma Capital acquired a 65 percent stake in Kolon Water & Energy, Korea’s number one water treatment company. Kolon Water & Energy was renamed into EMC Holdings and became a comprehensive incineration and landfill service provider by acquiring six smaller companies.

(By reporter Han Hee-yeon)