IMM PE's art of the exit: Cable maker, online mall

Seoul-based IMM Private Equity has come into the spotlight with a series of lucrative exits in South Korea, including the 265 billion won ($237 million) sale of the online fashion mall W Concept to the country's retail giant Shinsegae last week.

The $5.4 billion fund has completed five divestitures over the past six months, estimated to have produced a combined 1 trillion won in proceeds, including both the investment principal and capital gains.

The firm's aggressive divestments were in contrast to other private equity firms in Korea, which have opted to sit back until their portfolio companies achieve higher valuations and the pandemic recedes.

IMM PE was founded in 2006 by Chief Executive I.J. Song, an accountant. It focuses on Korea and Korea-related investment opportunities, with 30 investment professionals

TAIHAN ELECTRIC WIRE

The exit deal for Taihan Electric Wire Co. highlighted IMM PE's turnaround strategy. IMM PE took over a 71.51% stake in the country's No. 2 electric wire manufacturer for around 300 billion won in 2015. The company's reckless business diversification had aggravated its financial conditions, landing in the hands of creditor banks.

Since IMM's acquisition, Taihan Electric has jettisoned non-core businesses to shore up its bottom line and has advanced into overseas markets for large-scale projects. 

Its divestment plan, however, faced a roadblock. The South Korean government designated Taihan's ultra-high-voltage power cable systems as a core national technology in 2019, in an effort to keep foreign investors from acquiring the cable manufacturer, just when IMM PE put the company on the block.

But a sharp earnings increase helped IMM's exit from the cable manufacturer, which posted a 70% surge in operating profit to a record 56.6 billion won in 2020 from a year earlier. Also for a smooth exit, IMM had reduced its shareholding in Taihan to 40% in five block deals. Last week, IMM disposed of its remaining 40% stake in Taihan Electric to the apartment builder Hoban Group for 251.8 billion won.

W CONCEPT 


The online fashion platform was spun off from a domestic conglomerate in 2017. At the time, W Concept offered designer clothing brands for women with a limited customer base.

Since the 2017 purchase of W Concept, IMM PE has improved the online mall's logistics and IT systems. It also diversified W Concept's brand collection and developed its in-house brands, while expanding into men's apparel and beauty products. Now W Concept is ranked as the country's second-largest online fashion platform.

From the e-commerce platform's sale to Shinsegae last week, IMM locked in about three times its acquisition price of around 80 billion won in proceeds. 

HOLLYS COFFEE

The divestment from Hollys Coffee in seven years is projected to have generated at least twice its purchase price of 82 billion won in proceeds. It sold the coffee chain to the country’s chemical- to steel-focused KG Group, in its third attempt to exit the investment.

IMM's two other divestments included Lezhin Entertainment, a provider of Lezhin Comics, an online webtoon service for mature readers, which has a strong fanbase in North America and Japan; and iNtRON Biotechnology, an antibiotics treatment and diagnostic kits producer. IMM had invested in both companies in 2016 through its third, $1.2 billion flagship fund.

The return from iNTRON slightly exceeded its investment capital, marking the PE house's fifth profitable exit from Korean pharmaceutical companies.
 
IMM PE's divestments between 2020 and 2021:

In 2019, the PE firm had pocketed more than twice its investment capital of 280 billion won from the divestment of Tailim Paper Co. and Tailim Packaging Co. by selling a majority stake in both companies to a domestic apparel maker for 730 billion won.

NEW INVESTMENTS

With the launch of its fourth flagship fund RoseGold IV that closed at $1.8 billion in 2020, IMM has made four investments: Hanatour Service, South Korea’s largest travel agency; industrial gas company AirFirst; Genuone Sciences, the pharmaceutical spin-off from cosmetics maker Kolmar Korea Co.; and 750 billion won in preferred shares of Shinhan Financial Group.

Currently, it runs 16 portfolio companies, including K Bank, South Korea's first Internet-only bank and SOCAR, the country's most popular car-sharing company. 

To better manage its growing assets and diversified portfolio, IMM recently launched an operation-focused entity, headed by Executive Director Eugene Kim. 

IMM PE's new investments for RoseGold IV:

Meanwhile, IMM PE has been attempting to cash out of Kyobo Life Insurance Co., in which it had acquired a combined 24% stake, together with Affinity Equity Partners, Baring Private Equity Asia and Singapore’s GIC, for 1.2 trillion won in 2012. But their exit has been delayed by the country's third-largest life insurer failing to go public as promised by 2015.

Write to Chae-Yeon Kim at why29@hankyung.com
Yeonhee Kim edited this article.