TPG said on Tuesday it had named Sanghoon Lee as a partner and head of South Korea as the US private equity firm plots its return to the active buyout market.
The former Samsung executive and Morgan Stanley private equity investor hasn’t officially started yet and will be based in Hong Kong. He will report to Tim Dattels the managing partner of TPG Capital Asia.
“We see Korea, in particular, as a country poised for growth with untapped opportunities across multiple industries,” said Dattels in a statement.
TPG has recently made tentative steps to return to Korea, from which it withdrew in 2007 after its spectacular success sourcing deals in the 1990s.
TPG hired Seung-June Lee from Goldman Sachs in 2014 as a principal to work on Korean deals out of Hong Kong.
Recruiting Sanghoon Lee, the eldest son of Samsung chairman Lee Kun-hee’s former right-hand man Lee Hak-soo and a successful investor in his own right, signals TPG’s serious intent to aquire assets in Korea. To be sure, he has not established a track record in exiting investments as yet but the deals he has been involved in are largely performing well, according to industry sources.
Korea, with its mature companies and deep and liquid financing market, has seen some of the largest buyouts in the region of late. Carlyle agreed to acquire the Korean security business ADT Korea for $1.93 billion in 2014.
TPG did bid for Tesco’s Korean retail chain Homeplus in a consortium with local snackmaker Orion, but dropped out in the early stages of the bidding process. The highly-contested auction was eventually won last year by local firm MBK Partners in the largest buyout the Asia-Pacific region has ever seen at $6.4 billion.
Funds have amassed serious firepower in recent years but have struggled to put the money to work in the region. TPG finished raising $3.3 billion for its sixth Asia fund in 2014.
Too much too young
TPG chalked up a spectacular success in the South Korean market with its investment in nationalised Korea First Bank (KFB), which it cleaned up after the 1997 Asian financial crisis.
TPG acquired roughly half of KFB in 1999 for W500 billion ($442 million) and then more then doubled its money when it sold the bank on to Standard Chartered in 2005. TPG’s joint venture with Blum Capital, called Newbridge Capital, was responsible for the deal.
Newbridge Capital also bought Hanaro Telecom in 2003, beating powerful chaebol LG to the deal.
TPG shuttered its Korea office not long after the 2005 sale of KFB amid a backlash against the new wave of foreign funds making money on bailed-out state assets. Financial engineering by funds seemed a far more alien concept than it did in the US, where buyout firms had been operating for some years.
Since leaving Korea, TPG has cooperated with a local buyout fund called Vogo Investment Group to keep an eye on developments in the country.
Vogo’s managing partner, Byung Moo Park, was the Korea country head at TPG Newbridge Capital. Korea’s National Pension Service (NPS) invested $300 million in one of TPG’s funds.
The man behind the deals
Lee, also known as Lee Sang-hoon, first worked at Samsung C&T in 1998 after graduating from Korea University. He then took time out to earn an MBA from MIT Sloan School of Management and returned to Korea in 2001 to work for Samsung Life.
He spent six years with the Samsung Group in Korea and then spread his wings, joining Merrill Lynch to become head of M&A and capital market transactions in Korea.
In 2010 he moved to Morgan Stanley’s Asia private equity group where he became a managing director and head of Korea. The Asia-Pacific Private Equity Strategy managed by Morgan Stanley Private Equity Asia (MSPE Asia) invests primarily in highly structured minority investments and control buyouts in growth-oriented companies.
Since Lee joined MSPE Asia the firm has signed four deals in Korea. In 2014 it bought a 30% stake in Hyundai Motor’s advertiser Innocean Worldwide. Lee serves as a director of the ad agency. MSPE Asia also bought a controlling stake in the Korean restaurant franchise Nolboo in 2011, which is performing well and which the firm is now considering selling, industry sources said.
Other purchases made by the MSPE Asia team during his tenure have been stakes in Hanwha L&C and Ssangyong C&B Monalisa.
The firm closed its fourth fund in 2014 at $1.7 billion. MSPE Asia's return on money invested from Korean investments prior to fund four was about 2.8 times, according to industry sources.
MSPE Asia has partially exited Hyundai Rotem, a monopoly manufacturer of rolling stock that it invested in prior to Lee's arrival, realising proceeds of $120 million or a 2.3 multiple of the sum invested.
People familiar with Morgan Stanley's operations in Korea noted that MSPE Asia has around 10 investing professionals based in Seoul, including two remaining managing directors, making it one of the largest foreign private equity platforms in the country.
A spokesperson for Morgan Stanley confirmed that Sanghoon Lee would be leaving the firm and that new leadership for MSPE Asia in Korea will be announced shortly. He confirmed that this would be an internal appointment.
Korea has been a significant market for MSPE Asia, representing around 30% of its investing across the Asia region.
