US private investment firm Bain Capital is poised to acquire HS Hyosung Advanced Materials Corp.'s tire steel cord business in a deal estimated at around 1.5 trillion won ($1.1 billion).
Hyosung Advanced Materials, a unit of South Korea’s HS Hyosung Group, said in a regulatory filing on Monday that the US private equity firm (PEF) has been selected as the preferred bidder for the deal.
The transaction sets the stage for one of the country’s largest recent carve-outs in the industrial sector by a foreign private equity group.
The Boston-based PEF is expected to sign a definitive share purchase agreement as early as September, pending due diligence.
Bain Capital's global presence (Screenshot captured from its website) The deal is estimated to be worth in the mid-1-trillion-won range, according to people familiar with the matter.
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While Hyosung initially valued the business closer to 2 trillion won, expectations were adjusted downward during the sale process, reflecting more conservative pricing in the current private equity environment.
HS Hyosung Advanced Materials began the sale process in February by opening a preliminary bid and entered the main bidding process last month.
Initially, domestic private investment firms such as JKL Partners and STIC Investments Inc. were mentioned as strong candidates, but contrary to expectations, foreign PEF Bain Capital clinched the deal, sources said.
Hyosung's cap ply and carcass parts of a tire steel cord The deal, if finalized, would mark Bain’s latest bet on Korean manufacturing assets and reinforce the growing appetite of global private equity funds for mid-market industrial carve-outs in Asia.
LEADING PLAYER IN TIRE CORD SEGMENT
Tire cords are materials used to reinforce a tire’s durability, driving performance and safety as they maintain the shape of the tires and support vehicle weight.
Steel cord is made by bundling multiple thin wires together, helping tires absorb shock and improving ride comfort.
HS Hyosung Advanced Materials is the only company in the world that produces all three major tire reinforcements: steel cord, nylon tire cord and polyester (PET) tire cord.
HS Hyosung Advanced Materials Vice Chairman Cho Hyun-sang (right) at a business forum in Seoul last July Hyosung’s steel tire cord division is the leading player in North America and Europe. Globally, it ranks second.
Founded on a series of acquisitions, including its purchases of Michelin’s US steel cord plant in 2005 and two such factories from Goodyear in 2011, HS Hyosung Advanced Materials has built a solid international presence, particularly in the US.
Last year, Hyosung’s tire cord business posted about 900 billion won in sales revenue and an estimated 150 billion won in earnings before interest, taxes, depreciation and amortization – an earnings metric commonly known as EBITDA.
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Hyosung’s steel cord division is said to be generating about 40% of its total profit.
The sale of the tire cord business, which is less relevant to its main specialty fiber business, is part of HS Hyosung’s business restructuring to focus on new growth ventures.
Hyosung has sought to sell its tire steel cord business to secure funds for its new growth ventures, such as electric vehicle materials, hydrogen and artificial intelligence.
HS Hyosung Advanced Materials is led by Vice Chairman Cho Hyun-sang, the third son of the Hyosung Group founder.
Cho has vowed to foster EV materials, hydrogen and AI as the group’s new growth engines.
Write to Da-Eun Choi at max@hankyung.com In-Soo Nam edited this article.
