South Korea's DIG Airgas Up for Sale
The preliminary bidding for DIG Airgas, South Korea's third-largest industrial gas company, is set to take place in June. With infrastructure assets currently highly sought after in the M&A market, several large overseas Private Equity Fund (PEF) management companies with a keen interest in South Korean domestic investments are expected to submit bids.
Preliminary Bids Scheduled for June
According to Korean media reports on the 28th, Goldman Sachs and J.P. Morgan, the organizers for the sale of DIG Airgas, will conduct preliminary bidding in the first week of June. Major overseas PEFs and infrastructure-focused PEFs, including Kohlberg Kravis Roberts (KKR),
Brookfield Asset Management, EOTPartners, BlackRock, Stonepeak, and Ice Squared Capital, are reportedly considering participation.
The preliminary bidding for DIG Airgas was originally scheduled for this month but was delayed due to a postponement in sending investment memorandums (IM) to key buyers. Among the preliminary candidates, KKR, Brookfield, and Ice Squared Capital were involved in the initial bidding for Air Products Korea (whose sale failed last year) and have consistently shown interest in South Korean domestic infrastructure assets. The seller plans to hold preliminary bidding to select qualified candidates (a shortlist), followed by a formal bidding process.
Macquarie Asset Management Selling 100% Stake
The sale involves Macquarie Asset Management's 100% stake in DIG Airgas, its largest shareholder. DIG Airgas was founded in 1979 as a joint venture between Daesung Industrial and the French global industrial gas company Air Liquide Group. However, due to a deteriorating business environment in 2017, MBK Partners acquired management rights for KRW 1.8 trillion. In 2019, Macquarie Asset Management acquired the management rights from MBK Partners for KRW 2.5 trillion, becoming the largest shareholder.
The seller is hoping for a sale price of approximately KRW 5 trillion (approximately $26.2 billion USD). This price is calculated by multiplying DIG Airgas's projected EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of KRW 250 billion last year by 20 times. A multiple of 20 times was also used to calculate the expected sale price of industrial gas manufacturer Air Products Korea when it was put up for sale last year. Based on this, Air Products Korea's enterprise value is also predicted to reach KRW 5 trillion.
Potential Price Adjustment Due to Underperformance
However, since DIG Airgas's actual EBITDA last year was KRW 210.6 billion, lower than expected, some evaluations suggest that the sale price might decrease to around KRW 4 trillion (approximately $20.96 billion USD). While industrial gases are considered infrastructure assets with stable performance based on long-term contracts, they are inevitably affected by upstream industries such as semiconductors, displays, and electric vehicle batteries. The semiconductor industry, in particular, is seen as a sector where a market downturn could lead to deteriorating performance.
DIG Airgas plans to actively pursue new facility investments, including the construction of a new industrial gas ASU (Air Separation Unit) plant in Chungju City, North Chungcheong Province, South Korea, in the second half of this year. In addition to industrial gases, the company also plans to increase exports of its self-designed Air Separation Plants (ASP) and expand its product portfolio from industrial gases to engineering.
