슬라이드 1 - LBInvestment

LB Bi-monthly Newsletter
Recent Development and Trends:
Korean and Chinese
VC&PE Market
December 2013
December 2013
LB Bi-monthly Newsletter
2013 KOREAN PEF MARKET OVERVIEW
TOTAL COMMITTED AND CALLED CAPITAL (KRW trn)
45.0
35.0
31.8
30.0
20.0
20.0
10.0
27.9
26.6
25.0
15.0
42.3
40.0
40.0
17.7
14.6
9.0
4.3
5.0
9.5
8.3
21.1
12.3
0.0
2007
2008
2009
2010
2011
2012
2013.10
NUMBER OF PEFs IN KOREA
250
181
200
148
150
230
110
76
100
50
226
44
0
2007
2008
2009
2010
2011
2012
2013.10
TOP PEF GPs IN KOREA (BY TOTAL AUM)
No
GP
AUM (KRW bn)
1
KDB
59,156
2
MBK Partners
58,662
3
Mirae Asset
19,235
4
Vogo Investment
18,103
5
Macquarie Korea Opportunities
17,642
6
UAMCO
16,330
7
IBK
13,781
8
Shinhan PE
12,782
9
KTB
11,710
10
IMM PE
11,587
11
EQ Partners
11,035
12
STIC Investment
9,342
13
Skylake
9,309
14
Q Capital
8,572
15
Han & Co
7,967
 It has been a full decade since the first inception of
private equity fund (“PEF”) in Korea. PEFs were
brought to market via the revision of the Indirect
Investment Asset Management Act, which is now
called the Financial Investment Services and Capital
Markets Act (“FSCMA”) in December 2004. It was a
vehicle to promote corporate restructuring by
encouraging M&As and to develop the asset
management industry by providing diverse
investment assets.
 Since then, the Korean PEF market has since grown
to become one of the largest PE markets in the world
with total 230 funds and commitments of KRW
42.3trn. Among these, top 20 GPs manage 75% of
the total commitments (KRW 31.8trn) with significant
influence over the capital market.
 Number of PEFs registered at the Korean Financial
Supervisory Service (FSS) has also significantly
grown from 44 in 2007 to 230 in October 2013, while
total committed and called capital grew from KRW
9trn and KRW 4.3trn in 2007 to KRW 42.3trn and
KRW 27.9trn, respectively.
 Korea Development Bank (“KDB”) tops with the
largest AUM, KRW 59.2trn. A wholly stated-owned
policy bank in Korea, KDB is Korea’s representative
development financing bank, and as a result, its
major area of investment is focused in SOC. MBK
Partners, Asia-Pacific regional fund manager with
headquarter in Seoul, has the second largest AUM
with KRW 58.7trn; however, with its recent closing on
the $2.75bn Fund III, its AUM may have significantly
gone up, subsequently flipping the rank.
 The dominance of small and mid-sized PEFs in the
Korean PEF market is due to the fact the project
funds (or deal-by-deal funds) still take up the majority
of PEFs because of the lack of confidence in PEFs
and GPs who manage the PEFs. As the PEF market
matures and the GP reputation forms, we expect
blind funds will eventually account for the majority of
the PEFs.
December 2013
LB Bi-monthly Newsletter
KOREAN ECONOMY & PRIVATE EQUITY INDUSTRY
IPO, LP NEWS & ECONOMY
IPO Company Name
Date
Company Business
Haesung Optics
11/6
Camera lens
ACT
11/8
Phytochemical cosmetics
Midong
11/13
Automobile Blackbox
Ram Technology
11/18
IT (semi, solar cell, LED) materials
Lion Chemtech
11/19
Plastic & paint additives
Sinsong Holdings
11/21
Food service & restaurant chain
DMT
11/26
Satellite & cable set-top box
Hyundai Industrial
12/4
Automobile components (car seats)
NVH Korea
12/3
Automobile components (sound system)
 Korea Finance Corporation (KoFC) to
commit KRW 1trn in VC/PE in 2014 for total
fund size of KRW 2trn. Since inception in
2008, KoFC has committed KRW 4.2trn
across 78 funds for total fund size of KRW
9.6trn. 33 PEFs invested in 151 portfolio
companies while 45 VCs invested in 422.
 KoFC selects top GPs for 2013. LB
Investment was awarded as a Top VC as well
as IMM Investment, Kiwoom Investment and
Albatross Investment. STIC Investment and
KTB PE were awarded as Top PE GPs.
 NPS to cooperate with corporates for
foreign M&A’s. Also known as “Co-Pa
GigaLane
12/19
RF cable manufacturer
(Corporate Partnership) Fund,” the NPS’
special funding program participates as an FI,
IntroMedic
12/19
Medical equipment manufacturer
providing financing (usually 1:1 matching) to
OE Solutions
TBD
Optoelectronic transceiver solutions
Korean companies with short liquidity. So far,
Solueta
TBD
EMC/EMI, Thermal materials
Lotte, CJ, KEPCO (Korea Electric Power
Corporation), Pulmuwon, Nexen, LG Life
Ezwel
TBD
Corporate welfare program provider
Science and Incheon Airport Co have either
completed or been in progress of setting up a Co-Pa fund with the NPS. Posco and Hansol Paper are setting up Project
Funds for specific M&A opportunities.
Alticast
12/6
System software
DEAL ALERT
 Seoul Metro Line #9 sold to consortium of local financial institutions. Seoul Metro Line Nine is Korea’s first
privately run subway line that was operated by a joint venture between RATPDev and Veolia Transport, a France-based
company. The consortium consists of Shinhan BNP Paribas, Hanwha Asset Management, Kyobo life, Hanwha life, and
Heungkuk Life with BNP Paribas and Hanwha Asset managing the operator. Macquarie and seven construction
companies sold their stake to the local consortium.
 47.26% stake in P&T to be sold to Hanshing Partners. The largest shareholder of listed South Korean mobile-phone
parts maker, People & Telecommunication, sold his entire stake to Hanshing, a management consulting firm based in
Singapore for KRW 40bn. The seller is a private individual from South Korea who owned a 47.26% stake.
 Carlyle sells stake in EO Technics. The Carlyle Group sold an 11.12% stake in EO Technics, a listed semiconductor
fabrication equipment maker, through a block deal reportedly for KRW 55.8bn.
 Woongjin Holdings sells a 46% stake in Woongjin Chemical to Toray Advanced Materials. Woongjin Chemical a
listed chemical maker from South Korea and Toray Advanced Materials is the South Korean arm of Japanese company
Toray Industries. The sale was valued around KRW 354bn.
LB Bi-monthly Newsletter
December 2013
KOREAN ECONOMY & PRIVATE EQUITY INDUSTRY
DEAL ALERT (cont’d)
 JobKorea buys a 49.9% stake in Monster Worldwide. H&Q, a Korean PE firm, is to acquire 49.9% of JobKorea,
Monster’s South Korean sect, which is the leading career website in the country for $90mm.
 Gamevil buys a 21% stake in Com2us to become largest shareholder. Gamevil bought a 21.37% stake in Com2us
for KRW 70bn. Both Gamevil and Com2us are listed online and mobile game developers.
 Groupon to buy TMON from LivingSocial. LivingSocial sold Ticket Monster (TMON) to Groupon for $260mm in cash
and stock. Livingsocial had acquired TMON for $100mm in 2011 when it was trying to expand internationally.
 Amuse acquires Khan Entertainment. Amuse, a listed Japan entertainment company that manages artists, acquired
the Korean entertainment talent agency for undisclosed amount.
 Acciona Energia sold Yeong Yang 1 wind farm. The renewable energy group based in Spain sold the wind farm
located in Gyeongsangbuk-do province to a company wholly owned by a Korean investment fund for KRW 162bn.
 Suzhou Jinfu agrees to purchase 97.82% stake in DSLCD Suzhou. China-based Suzhou Jinfu New Material is to buy
a 97.82% stake in DSLCD Suzhou for $5.5mm. DSLCD Suzhou is based in China and manufactures LED-related
electronic components, although its parent company DSLCD is based in Korea.
 Safuan Korea to acquire 30.84% stake in Sejin Electron. Safuan Korea, a Korean arm of the Malaysian conglomerate
Safuan Group, is to acquire a 30.84% stake in Sejin Electron, a listed South Korean auto parts maker, for KRW 15bn.
 Macquarie’s acquisition of ING’s Korea asset management business now complete. Macquarie Group has now
completed the acquisition of ING’s asset management business in Korea. In FY 2012, ING Investment Management
Korea recorded revenues of KRW 24bn and managed around KRW 25tn of assets as of March 2013.
 GS-LG consortium likely to win STX Energy acquisition. In the groups’ first attempt to join forces in an acquisition,
GS Energy and LG International consortium are reportedly in talks to finalize deal, as Japan’s Orix, the largest
shareholder of STX Energy, was satisfied with the price.
 LIG to sell insurance business. LIG Group’s owner and his family members are selling all their shares in LIG
Insurance in an effort to secure cash and compensate investors for losses from a financial fraud scandal in 2011. The
combined stake is 20.96% and value of the equity is estimated at KRW 500bn.
 Skylake Incuvest to Sell 14.3% Stake in POSCO Energy. Skylake bought a 12.86% in RCPS in 2010 followed last
year by another 1.44% in common shares. The stake is valued at about KRW 300bn, based on a deal in 2012 when
STIC Investments bought an 8.13% stake.
 Major PEFs Bid for Multiplex Operator MegaboxCinus. Apparently 5-10 major PEFs including CVC submitted LOIs,
while CJ Group with CJ CGV (43.2% theater market share) nor Lotte with Lotte Cinema (28.2%) tendered applications
for internal reasons. Current shareholders of Megabox include J Contentree, a Joongang Newspaper company (46.3%)
and Yeo Hwan-joo, Megabox president (3.7%) and Macquarie Korea (50.0%), and the value is estimated at KRW 600bn.
 NXMH acquires Stokke. Stokke is a Norway-based company that provides branded premium baby and children’s
products and NXMH is an investment company, wholly owned by NXC which is the largest shareholder in NEXON.
LB Bi-monthly Newsletter
December 2013
CHINESE ECONOMY & PRIVATE EQUITY INDUSTRY
ECONOMY & MARKET UPDATE
 China's GDP growth could hit 7.8% next year. GDP
grew 7.8% in 3Q up from 7.5% in 2Q, maintaining a steady
growth with major indicators within the rational range.
 China's investment growth to remain steady in 2014.
China's fixed assets investment is likely to grow below
20% for the first time in 12 years. The reform package
issued recently by the government will boost investment
next year, with infrastructure construction and service
sector development leading further investment.
 China's inflation up 3% in Nov’13. CPI, main gauge of
inflation, grew 3% y-o-y down from 3.2% in Oct’13.
 China's fiscal revenue maintains fast growth. China's
fiscal revenue achieved rapid growth in November, partly
due to its stabilizing economy, rising 15.9% y-o-y in
Nov’13 to RMB 912.5bn. The country's revenue has
experienced double-digit growth for 3 consecutive months.
 Growth of brand value in private sector beats SOEs.
The brand value growth of non-State-owned enterprises in
China is 3 times larger than that of SOEs, indicating an
increasingly consumer-driven market amid government
efforts to emphasize the rebalancing of the domestic
economy. In the top 50 of the rankings enjoyed value
growth of 27%, compared with 9% for State-owned
enterprises, according to the study. 2014 WPP BrandZ™
Top 100 Most Valuable Chinese Brands.
DEAL ALERT
 Overseas investment to maintain robust growth in 2014. The Chinese government's reform plans suggest that China
will further open up the overseas investment of Chinese enterprises with better policies and increased support. In 2012,
China's overseas investment totaled $87.8bn, up 17.6% y-o-y, making the country the world's third-largest investor for
the first time. In the same year, total global foreign direct investment dropped 17% from a year earlier.
 Foreign-funded firms in China total 446,400, rising 0.37% from a month earlier. Total registered capital of foreignfunded companies increased 0.88% from a month ago to RMB 12.3trn. China's actual use of F야 dropped 3.7% y-o-y in
2012, compared with an increase of 9.72% in 2011. Due to the economic slowdown in China and the rest of the world,
foreign companies have slowed down their investments in China since 2012.
 PE, VC investors see big returns in M&As. The average investment return from M&A exits was 2.5x higher during
YTD 3Q’13 in China's PE.VC markets, the first time the figure has exceeded that from IPO exits. Average investment
returns from IPO exits peaked at 14x in 2011. However, the return dropped to only about 2x in 1Q’13. The value of
returns from M&A exits has been $3.4bn more in 2013 due to stagnant IPO market.
LB Bi-monthly Newsletter
December 2013
CHINESE ECONOMY & PRIVATE EQUITY INDUSTRY
DEAL ALERT (cont’d)
 Baidu founder moves to top of billionaires list. Robin
Li, founder of China's largest search engine, Baidu Inc,
overtook property tycoon Wang Jianlin for the first time to
become the richest Chinese man according to Bloomberg.
Li's net worth has increased by 65%, or $4.8bn, to reach
$12.23bn so far this year as Baidu's shares rallied.
Meanwhile, Wang, chairman and president of Dalian
Wanda Group, has seen his fortune climb by $2.9bn to
$12.16bn this year.
 Sharp drop in number of Chinese IPOs. The number of IPO by Chinese companies plummeted in 2013, as regulators
suspended new listings in China in preparation for reforms. Only 80 Chinese companies listed shares worldwide so far in
2013, raising a total of RMB 77.68bn, down 46.2% y-o-y.
 US-China movie theater chain aims for $368mm in IPO. AMC Entertainment, the US movie theater chain owned by
China's Wanda Group, plans to raise as much as $368mm in its IPO. The second-largest theater chain in North America
plans to use the proceeds to reduce debt and for general corporate purposes.
 PetroChina gets stake in Exxon Mobil field. The country's largest oil producer is to buy a 25% stake in Iraq's West
Qurna 1 oilfield from Exxon Mobil. The cooperation project between the world's top listed oil companies will further boost
the Chinese giant's already strong presence in Iraq's oil industry.
 CNPC buys oil assets in Peru. China National Petroleum Corporation, the country’s largest oil and gas producer and
supplier, will pay $2.6bn to buy Petrobras Energia Peru, which owns three oil and gas blocks in Peru.
 CIC to purchase London office park. China Investment Corporation, China's sovereign wealth fund, is close to a deal
with US private equity group Blackstone on the acquisition of an office park in western London. The 32-acre Chiswick
Park is valued at ￡800mm, and it will make the highest value real estate purchased made by CIC.
 CCB to acquire majority stake in Brazil's BicBanco. China Construction Bank Corp is to acquire a 72% stake in a
Brazilian bank, Banco Industrial e Comercial SA (BicBanco), for $726mm. CCB, China's second-largest lender by assets,
hasn't completed any offshore acquisitions for 7 years, since it bought BA Asia Ltd for HK$9.71bn.
 Carlsberg buys majority stake in Chongqing Brewery. Danish brewer Carlsberg upped its stake in China's
Chongqing Brewery to 60%, strengthening its foothold in the world's largest beer market by volume, and hopes to
increase its holding further. Carlsberg inherited a stake in Chongqing through its takeover of British brewer Scottish &
Newcastle in 2007, raised it in 2010 to become the biggest shareholder with 29.7%, and now purchased an additional
30.3% for RMB 2.9bn.
 Swiss Re buys a 4.9% stake in New China Life. Headquartered in Beijing, New China Life is the third-largest life
insurer in China in terms of gross premium. The global re-insurer paid HK$3.82bn ($493mm) to tap in to the world’s 5th
largest insurance with relatively very low penetration.
 CCA buys on Hudson riverfront, expanding presence in NYC. China Construction America Inc (CCA), a wholly
owned subsidiary of China State Construction Engineering Corporation, completed the acquisition of 99 Hudson, a
mixed-use development site overlooking Hudson River in Jersey City, New Jersey. This marks CCA's second all-cash
real-estate transaction in Metro New York, valued at $70mm.
LB Bi-monthly Newsletter
December 2013
LB NEWS UPDATE
LB NEW PORTFOLIO COMPANIES
LB made new investments in the following portfolio companies in the past two months:.
1)
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Eyegene
Founded In: 2000
Investment Stage/Type: Later Stage
Industry: Bio (Pharmaceutical)
With strong network and partnerships with leading hospitals and pharma companies in
Korea, Eyegene has developed new medicines treating diseases such as EG-Mirotin
(diabetic retinopathy), EG-Decorin (pressure ulcer) and EG-HPV (cervical cancer).
EG-Mirotin is the world’s first medicine to treat early-stage diabetic retinopathy.
Hugel Pharma
Founded In: 2012
Investment Stage/Type: Later Stage
Industry: Bio (Pharmaceutical)
The company focuses its research and development in anti-aging products and has
successfully developed Botulax, a biological drug of botulinum toxin (also known as
botox), which was approved from the Korea Food and Drug Administration in 2010.
Botulax has since been selling with wide popularity due to its high quality.
H&S HighTec
Founded In: 1995
Investment Stage/Type: Later Stage
Industry: IT (Display panel film)
The company’s main business item is ACF (Anisotropic Conductive Films), an
advanced electronic package material used for flip chip bonding. Main application for
the ACF is for various display modules like TFT-LCD, PDP, mobile equipment and
semiconductor. The company was able to bring out fine pitch capability and make the
flat panel displays smaller, lighter and thinner.
Reference Biolap
Founded In: 2007
Investment Stage/Type: Later Stage
Industry: Bio (Pharmaceutical)
The company develops biological drugs to treat multiple sclerosis and cervical cancer
targeting E6/E7 proteins derived from HPV, as well as various diagnostic systems
based on novel biomarkers. The company has been working as the pathology core
facility of Seoul National University, providing pathology analysis and other diagnosis
services to the domestic hospitals based on molecular genetics analysis system.
Entermate
Founded In: 2001
Investment Stage/Type: Later Stage
Industry: Internet (Online/mobile game)
While the company has developed several popular internet/mobile games, its main
business focus is in game publishing. The company owns an web game portal “I Love
Game (www.ilovegame.co.kr)” and has been distributing popular web games including
“Shinsundo” to over 3 millions member users.
hugel
bio medical products
LB Bi-monthly Newsletter
December 2013
LB NEWS UPDATE
LB RECENT INVESTMENT DEVELOPMENTS
LB also exited a total of 3 portfolio companies successfully through M&As and IPOs in KOSDAQ during 2013.
1)
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PPStream (Exited)
Online video streaming service (“Hulu” of China)
Series-C /Mid stage investment
Time of investment : April 2008
Time of exit : June 2013
Exit through M&A : Baidu, China’s No.1 online search engine, acquired PPS’ online video business for $370mm. LB
made over a 5.0x return on a gross cash-on-cash basis and a gross IRR of 37.2%
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UUCUN (Exited)
Mobile advertising (UUadv) and application market place for Androids (UUdev)
Series-C /Mid stage investment
Time of investment : November 2012
Time of exit : August 2013
Exit through M&A : UUCUN’s android 3rd party app market business was acquired within less than a year since LB’s
investment. LB will make a 2.7x return on a gross cash-on-cash basis and a gross IRR of approx. 300%.
2)
3) TESNA (Exited)
– Semiconductor test house
– Mid stage investment
– Time of investment : July 2008
– Exit through IPO: Listed in KOSDAQ in Oct’13; sold in the market for a cash multiple of 3.3x.