The deal means that Halla will regain control of a business that it was forced to sell to the private equity firms following the Asian financial crisis. CCMP and Affinity, meanwhile, will cash in on a stake they have held since 2000, which they purchased from Halla for $446 million.
If the transaction is successful, Halla will buy the 72% stake for W650 billion ($685 million), equal to about 5.4 million shares at roughly W120,000 a share.
Halla has reportedly been negotiating since late last year to buy the auto parts company, forming a consortium with Kumgang Korea Chemical (KCC) and Korea Development Bank for the deal. It benefited from significant customary shareholder rights in this transaction, since Halla already owns a minority, but meaningful, stake in Mando. Twenty-eight per cent of Mando stocks are shared among Halla and Mando management, although the exact details of Halla's own stake are not known.
ôFor Halla, this is an opportunity to own a company that has substantial strategic relationships in the automotive sector at a time when Halla is looking to continue its expansion internationally,ö says a source.
The family connection between Halla and MandoÆs biggest customer Hyundai Motors is also thought to have played a role in the transaction. Halla Group was established by the younger brother of Hyundai GroupÆs founder in 1962.
ôI donÆt think this connection was necessarily helpful in the transaction since Halla already benefited from substantial shareholder rights, but perhaps this was one of the reasons why Halla wanted to regain control of the company,ö continues the source. Nonetheless, a higher bid by Kohlberg Kravis Roberts reportedly failed due to opposition from Hyundai and Kia Motors - Mando's biggest clients - according to Korean media who cited a Halla official.
Neither Mando nor Halla were available for comment.
Halla shares rose 3.6% to W31,500 on the acquisition news, closing down 0.5% at W30,250. This outperformed a 3% fall in the broader market.
The transaction marks a significant comeback for Halla Group, which collapsed in 1997 after defaulting on $220 million in loans. The conglomerateÆs financial performance in the last decade has now allowed it to regain control of what used to be one of its few profitable entities after the crisis. The trend has continued with Mando posting a net profit of W82.8 billion on sales of W1.58 trillion in 2006.
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