Hyundai Department Store is in talks with private equity firms, including Carlyle of the US, over the sale of a large minority stake in its cable TV unit.
The deal, worth up to US$300m, could provide buy-out groups with a rare acquisition opportunity in South Korea following a couple of barren years.
The lack of deal flow in South Korea, traditionally one of Asia’s largest buy-out markets, is raising fears that overseas private equity groups could find it difficult to invest the estimated $60bn-plus they have at their disposal in the region.
People close to the situation said that domestic and foreign buy-out firms had shown interest in purchasing the holding in Hyundai Communications & Network, one of the country’s top four cable TV operators with more than 1m customers.
It is understood that Hyundai Department Store, which runs a South Korean department store chain, is planning to sell a minority stake of about 40 per cent, despite pressure by some potential bidders to cede control.
People close to the situation said the company had made clear to potential buyers that it was not obliged to sell a stake in HCN and was exploring alternatives to fund the business, including a possible flotation.
Hyundai Department Store and Carlyle, which is believed to be close to selling its Taiwanese cable TV business to a consortium led by Australia’s Macquarie Bank for about US$900m, declined to comment.
Analysts said that HCN would appeal to private equity groups because of its predictable cashflow and growth potential.
However, the interest from domestic and foreign private equity groups for a minority stake in a small unit of one of South Korea’s chaebol highlights the tough market conditions for buy-out groups.
After clinching multi-billion dollar deals for some of South Korea’s largest banks following the 1997-98 financial crisis, private equity groups such as Carlyle, Newbridge Capital and Lone Star have been unable to find similarly large buy-outs.
Buy-out groups had hoped the restructuring of South Korea’s corporate world would offer opportunities to buy non-core units from slimmed-down chaebol, but there have been few deals so far.
“It’s getting increasingly difficult to source deals in Korea and elsewhere in Asia,” a senior private equity executive said. “Unless things change, people will end up overpaying or having to settle for smaller deals.”