Domestic private equity manager IMM Private Equity (PE) has moved to set up a continuation fund for industrial gas producer AirFirst. The closing target is November, and pensions, mutual aid associations, banks, and securities firms are said to be considering committing 10 billion to 20 billion won each.
According to the investment banking (IB) industry on the 19th, IMM PE has decided to transfer 70% equity in AirFirst from an existing blind fund to a new continuation fund and is contacting domestic institutions to gather limited partners (LP) for the continuation fund.
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 an existing 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 pensions, mutual aid associations, banks, and securities firms' principal investment (PI) divisions. Institutional commitments of 10 billion to 20 billion won each are being discussed.
Because AirFirst is one of IMM PE's flagship portfolios, many institutions are said to be weighing commitments not only for the asset's inherent investment appeal but also for the potential to build a long-term relationship with IMM PE. Securing a relationship with the manager and LPs can relatively increase the chances of follow-on transactions such as acquisition financing mandates and co-investments when the manager 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 clients, it is viewed as having 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 consideration for the secondary shares at the time was about 1 trillion won, and through this transaction AirFirst was valued at about 3.5 trillion won.
In this continuation fund, AirFirst's valuation is being discussed at more than 4 trillion won. The key will be how convincingly it can prove the appropriateness of that valuation. Because a continuation fund has a structure in which a new fund of the same manager acquires assets held by an existing fund, a conflict-of-interest debate can arise over the transaction price. For this reason, analyses note that objective pricing grounds and verification procedures for future growth are crucial in the process of attracting external investors.