An E&F Private Equity (PE) and IS Dongseo (IS Dongseo) consortium will sell management control of waste incineration company Koentec to Hong Kong-based private equity fund (PEF) manager Gaw Capital.
According to the investment banking (IB) industry on the 16th, the E&F PE and IS Dongseo consortium signed a stock purchase agreement (SPA) with Gaw Capital that day. Gaw Capital plans to conduct settlement due diligence and environmental due diligence for about four weeks. The deal closing is expected to take place when the Fair Trade Commission's business combination filing is completed. The transaction amount is confirmed to be in the mid-700 billion won range.
In the main bid held on Sept. 9, Gaw Capital, Affirma Capital, and IMM Private Equity (PE) participated. This transaction effectively proceeded as a progressive deal (auction-style bidding), and it is known that Gaw Capital and IMM PE submitted revised proposals over the price and detailed terms until the end. The sell-side, based on competition among multiple bidders, signed a contract directly with Gaw Capital, whose terms aligned, without a separate preferred negotiator selection process.
In this transaction, Gaw Capital is said to have proposed an earn-out structure. An earn-out is a method in which the buyer pays the seller additional consideration if the target company achieves certain future performance. It is a plan that can satisfy both the seller, E&F PE, and the major shareholder, IS Dongseo. At the time of the Koentec acquisition, IS Dongseo participated as a subordinated investor.
The industry believes that, since IMM PE has already secured a high market position in the waste industry through Ecorbit, the length of the business combination review period could act as a risk factor.
When this transaction is completed, the E&F PE and IS Dongseo consortium is expected to realize an exit five years after acquiring Koentec in 2020.