Buyout Fund Emerges as Major Player

A company named MBK Partners suddenly made itself an important variable in the bid for LG Card, which was coming to an end at the beginning of last month. This is because the company and Hana Financial Group had agreed to join hands in bidding to acquire LG Card.

There was a close match between the bidders until the very last moment as it became known that MBP Partners was ‘loaded’ with KRW 1.0 trillion. In the end, LG Card was taken over by Shinhan Financial Group for KRW 7.2 trillion, but Shinhan Group had to pay heavily for the deal. At the time, the financial industry had expected LG Card to be sold at a price slightly above KRW 6.0 trillion, but with MBK Partners suddenly taking part, Shinhan had to offer KRW 1.0 trillion more.

Former Carlyle Fund Executives Rounded Up 1 Trillion Won-

Other than the merger and acquisition (M&A) for LG Card, MBK Partners also jumped into the race to take over big groups such as Daewoo Electronics, S&T Daewoo and Trigem Computer. The company is a private equity fund run by the funds of investors. In other words, the company is a buyout fund which takes over a faltering enterprise and stabilizes the firm by restructuring the organization, and then resells it at an expensive price. The cases of Lonestar that bought Korea Exchange Bank and then sold the bank to Kookmin Bank, or Carlyle Fund that acquired Hanmi Bank and then resold the bank to Citibank, are examples of buyout funds.

MBK Partners was established in September, 2005. Although they started out with the small number of seven people, the group managed to get together KRW 1.0 trillion of investment funds in a year. There is also an analysis that the halo effect of being former Carlyle members played a part in this company arose as an important figure in the M&A market.

The founder of MBK Partners, Chairman Kim Byung-ju, led the buying of Hanmi Bank in 2000, as well as the reselling of it when he was the Asia representative for the U.S. Carlyle Fund. It was also an issue when he left a 145% earning rate while reselling Hanmi Bank to Citibank in 2003. After that, Chairman Kim established MBK Partners with his Carlyle Asia associates in 2005, deriving the company name from his English name, Michael Byungju Kim.

The company purchased Hanmi Capital in June 2006, a firm that leases imported cars, and at the beginning of this month it also took over HK Mutual Savings Bank. Recently in the bid for Daewoo Electronics, MBK Partners was named as the reserved bidder, next in line to the consortium with India’s VideoCon Industries. MBK Partners has six investing workers and offices that are run with funds of KRW 500billion each, in both Shanghai and Tokyo. Yoon Jong-ha, the Korea representative for MBK Partners said, “We are searching for companies with good fundamental, regardless of what type the business is.” He added, “Our goal is to become Korea’s leading private equity fund.”

A large part of the funds is known to be foreign capital-

There are some voices from Korea’s financial industry that caution against MBK Partners’ fast growth. This is because a large part of the company’s funds are known to be from foreign investors, such as the Singapore investment firm, Temasek and Canada’s Teachers’ Pension. The argument is that the profits of MBK Partners’ investments go straight back to foreign investors, so just because their office is in Seoul, it is difficult to observe the company is a Korean firm.

In reply to this, Yoon said, “I cannot disclose the identity of our investors as it is confidential, but influential Korean corporate investors have also invested a large amount in us.” He added, “We will act as a window for helping domestic investors to do foreign investment.”

sanhkim@donga.com