Baring Asia helps reset Korea cement sector

The private equity firm’s sale of Halla Cement to Asia Cement could give an extra fillip to pricing power for the top players.

Korea's cement sector is resetting fast.

Baring Private Equity Asia’s sale of Halla Cement to a mid-tier Korean cement company, Asia Cement, is the latest in a string of deals that could strengthen pricing power.

The acquisition will transform Asia Cement into the third largest cement player in Korea with an 18% market share, up from seventh largest with a 7% share.

Baring Asia sold all of Halla Cement for an enterprise value of $710 million (W773.95 billion). The price tag looks in line with recent deals. 

The more dominant the oligopoly, the more pricing power for top-tier firms say sector analysts.

Earnings become reliably strong despite market conditions if the top four companies account for at least 75% of the market, analysis of 90 different markets by brokerage Korea Investment and Securities showed. 

At the end of 2016 the seven largest players in the Korean cement market represented 90% of the market. Since then the number at the top has shrunk.

A consortium of Hanil Cement and LK Investment Partners acquired 84.6% of Hyundai Cement for W622.1 billion in February, which would equate to about W760 billion for 100%. The buyout made Hanil Cement the country’s leading cement company with domestic shipments of 11.17 million tons, overtaking Ssangyong Cement Industrial at 9.91 million tons.

Cement companies in Korea have long struggled with moribund market conditions and several ended up with banks as major shareholders after they failed to repay their debts. 

In August 2015, Sampyo Cement and KDB Private Equity bought a 55% stake in Tongyang Cement & Energy, Korea’s fourth-largest cement producer, for W290 billion. The company had been in receivership since December 2013.

Then in December, Korean private equity firm Hahn & Co bought 46.14% of Ssangyong Cement Industrial, the country’s largest – and also bankrupt – cement manufacturer, for around $683 million. It bought the shares from Ssangyong’s bank creditors, led by Korea Development Bank.

Hahn previously acquired Daehan Cement in a bankruptcy court-overseen process in 2012.


Private equity funds have in a few cases bet that they could reduce costs more effectively than multinational players in Korea.

That was the strategy of KKR when it bought Oriental Brewery from AB InBev, Carlyle when it acquired ADT Korea from Tyco, as well as in MBK’s acquisition of HomePlus from Tesco.

In this case Baring Asia has been able to cut costs at Halla Cement in a very short time frame. 

European building materials firm LafargeHolcim said in March 2016 that it had signed an agreement with a consortium of private equity funds, Korean fund Glenwood and Baring Asia for the divestment of Lafarge Halla Cement in South Korea for an enterprise value of W560 billion ($478.48 million at the time).

It was not the first time Baring Asia had bought businesses from Lafarge. The Hong Kong-based private equity company bought a 14% stake in Lafarge’s Indian operation in 2013 for $225 million. It subsequently exited the stake by selling it to Lafarge for around $253.15 million in June 2015, just before the Swiss company merged with Holcim.

Baring Asia bought the common equity in Halla Cement while Glenwood provided the mezanine finance in the transaction.

Baring Asia has since recapitalised the company and taken out the expensive mezanine finance.

The transaction is subject to customary regulatory approvals, and is expected to close in the first quarter of next year.

Citi acted as exclusive financial advisor to Baring Asia. Korea Development Bank advised Asia Cement‎.

¬ Haymarket Media Limited. All rights reserved.
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