Domestic private equity manager IMM Private Equity (PE) has moved to set up a continuation fund for industrial gas producer AirFirst. The target closing is in November, and pension funds, mutual aid associations, banks, and securities firms are reportedly reviewing commitments of more than 100 billion won each.
On the 19th, according to the investment banking (IB) industry, IMM PE decided to transfer 70% equity in AirFirst from an existing blind fund to a new continuation fund and is contacting domestic institutions to gather continuation fund limited partners (LPs).
A continuation fund is created to move quality assets held by a private equity fund into a new fund to extend the holding period. It is formed to keep holding quality assets of a fund at maturity without selling them. It gives existing fund LPs an exit opportunity and offers new fund LPs a chance to invest in vetted assets.
IMM PE has begun LP fundraising targeting major domestic pension funds, mutual aid associations, banks, and securities firms' principal investment (PI) units. Each institution is estimated to commit at least 100 billion won. Some institutions are said to have expressed interest in committing 1 trillion won.
Because AirFirst is one of IMM PE's flagship portfolios, many institutions are said to be reviewing commitments not only for the investment appeal of the asset itself but also considering the potential to build a long-term relationship with IMM PE. Securing a relationship with the manager as an LP can relatively increase the likelihood of follow-on transactions—such as acquisition financing arrangements and co-investments—when the manager later pursues new mergers and acquisitions (M&A) or refinancing of existing portfolios.
AirFirst produces and supplies industrial gases such as nitrogen, oxygen, and argon used in manufacturing processes including semiconductors and petrochemicals. With Samsung Electronics and SK hynix as customers, it is considered to have stable cash flow.
IMM PE acquired AirFirst for about 1.3 trillion won in 2019 and sold a 30% equity stake to BlackRock in 2023. The proceeds from the secondary share sale were about 1 trillion won, and through this transaction AirFirst was recognized at a corporate value of about 3.5 trillion won.
In this continuation fund, AirFirst's corporate value is being discussed at more than 4 trillion won. The key is how convincingly the appropriateness of that valuation can be demonstrated. Because a continuation fund involves a new fund of the same manager acquiring assets held by an existing fund, conflicts of interest can arise over the transaction price. As a result, during the process of attracting external investors, objective grounds for price determination and verification of future growth prospects are seen as crucial.