KKR & Co. has wrapped up the 875 billion won ($739 million) purchase of two South Korean industrial and medical waste treatment companies after completing the final payment on August 19, according to investment banking sources.
Under the deal, KKR acquired 100% of ESG Co. Ltd., a medical waste treatment firm, and 77.84% of ESG Cheongwon Co. Ltd., an industrial waste management company, from Hong Kong-based private equity firm Anchor Equity Partners.
ESG Co. runs seven subsidiaries across the country that form the ESG Group, including ESG Cheongwon. ESG Co. holdes the remaining 22.2% of ESG Cheongwon based in the Cheongwon Province.
The acquisition became KKR’s first buyout deal in South Korea in two years, following the launch of $1.3 billion KKR Global Impact Fund in February. The Impact Fund focuses on sectors providing commercial solutions to environmental or social problems, including waste management.
In June, the US investment firm was chosen as the preferred buyer of the ESG Group, in competition with New York-based Stonepeak Infrastructure Partners. KKR had under-the-table negotiations with Anchor Equity and outbid Stonepeak with a higher offer, the sources said. Citigroup Global Market Securities managed the sale.
The ESG Group is one of three Korean waste management groups up for sale this year. All of them were owned by foreign financial investors, including Macquarie and Affirma Capital.
KKR had participated in the preliminary auctions for all the three Korean waste treatment groups, but dropped out of the race for Korea Environment Technology Co. Ltd. (Koentec) and Saehan Environment Co. Ltd. – sold by Macquarie Korea Opportunities Management Ltd.
MEDICAL WASTE TREATMENT MARKET
Compared with EMC Holdings and Koentec which focus on wastewater and industrial waste treatment, respectively, ESG Group mainly handles medical wastes. ESG owns four of South Korea’s 13 medical disposal facilities.
The medical waste treatment market is expected to continue to grow in line with the the senior care market expansion. Rising per-ton treatment price of medical wastes will also shore up their balance sheets, combined with high entry barriers to the sector because of environment-related regulations.
From the divestment, Anchor Equity achieved a return of almost five times. It had spent a combined 180 billion won in buying six Korean waste management companies of the ESG Group, since acquiring ESG Cheongwon in 2016.
Last year, it sold Geo-Young Corp., a medical goods wholesaler, to Blackstone for 1.1 trillion won, nearly three times its investment and Health Balance Co. Ltd., a dietary supplement company, to TPG for around $250 million.
Anchor Equity has recently put Daeheung Farm Co. Ltd., the world’s biggest mushroom farm, back up for sale, which is estimated to bring in about 200 billion won. It is also expected to revisit the sale of TMON Inc. a Korean ecommerce platform. Both Anchor Equity and KKR acquired a majority stake in the online shopping platform in 2015, but their talks with Korea’s retail giant Lotte Group to sell the Korean company faltered last year.
By Chaeyeon Kim
<Edited by Yeonhee Kim>
