MBK Partners partially cashed out its stake in South Korea’s Coway through an accelerated bookbuild (ABB) of shares on Monday, extending a dealmaking streak in the public markets that began early last year.
MBK raised $330 million through the Reg-S only sale of 3.78 million Coway shares at W98,000, at the bottom of the W98,000 to W101,000 guidance range. The final price represented a 6.7% discount to the stock’s Monday close.
The 5% stake sale in Korea’s leading water purifier maker marks the first monetisation for the Korean private equity firm since it bought a 30.9% stake back in 2012 for $1.1 billion, or W50,000 per share.
That suggests MBK made a lucrative return of 96% over the course of four and a half years, which is quite remarkable considering that Korean stocks are up only 29% in the same period. In addition, the shares were sold close to the stock's all-time high of W108,500.
One source familiar with the situation said the bookbuild went smoothly thanks to strong visibility of demand ahead of launch. The trade was said to be about 70% covered when the bookbuild began and ended up well subscribed by existing shareholders and long-only investors in what the source described as “one of the highest quality books ever seen”. In the end, the top 10 accounts were allocated over 70% of the shares.
Coway’s existing shareholders include a group of well-known money managers such as South Korea’s National Pension Service, Singapore's GIC, Lazard, Blackrock and Norges Bank.
The stock traded at a fairly stable level above the offer price at around the W99,000 mark early Tuesday morning.
Lock-up with M&A carve-out
A block trade of MBK shares was always going to be a tricky proposition for MBK, given that it announced plans in 2015 to find a strategic buyer for its full stake in Coway.
ABB deals typically involve a lockup restriction for the vendor in order to ensure stable trading immediately after the sale. That would limit MBK's ability to exit the investment in full.
With that in mind, sole bookrunner Goldman Sachs structured the deal with an unusually long 12-month lockup, but provided a carve-out for M&A transactions. According to the source, the longer lockup period (normally lockups are for three to six months) was meant to limit any short-term overhang on the stock, while the carve out keeps open any strategic sale opportunities.
Goldman Sachs is a long-term adviser for MBK on Coway. The firm advised MBK on the acquisition in 2012 and subsequently the planned strategic sale in 2015. The sale plan has so far come to nothing, in part because of a massive recall last year of some of Coway's water purifiers after powdered metals were found in some of them.
MBK has perhaps been one of the most important income sources for deal advisers over the last 12 months because of its active dealmaking for both entries and exits.
Private equity firms are not known for acquisitions in the public market but MBK has certainly reversed that thinking over the past year. In March, it bought Seoul-listed Daaesung Industrial Gases for $1.6 billion in the largest secondary buyout in Korean history, a month before it sealed a deal to acquire Tokyo-listed Accordia Golf for $760 million.
Last month, the company — led by the 'Godfather of Asian private equity' Michael B. Kim — exited its investment in ING Life Korea through an initial public offering of shares that fetched $970 million.
MBK is also active in the private market. Last year, the company bought Doosan Infracore’s machine tool business for $950 million. In partnership with TPG Capital, MBK has acquired Wharf T&T, the telecom business of Hong Kong’s The Wharf Holdings, for $1.2 billion.