Affinity to buy SK Rent-a-Car at $572 mn, more deals expected
Jun-Ho Cha
Apr 16, 2024 (Gmt+09:00)
Affinity Equity Partners is set to buy SK Rent-a-Car Co., South Korea’s No. 2 car leasing company, at some 800 billion won ($572 million), raising expectations that the leading Asian buyout fund manager, under new leadership, may resume acquisitions in the country after a three-year hiatus.
SK Networks Co., a unit of South Korea’s second-largest conglomerate SK Group, selected Affinity as a preferred bidder to sell a 100% stake in the car rental company with an estimated corporate value of around 3 trillion won, including its debts of 2 trillion won, people familiar with the matter said on Tuesday.
The private equity (PE) firm focusing on Asia-Pacific beat out competitors such as Glenwood Private Equity Co. and IMM Private Equity Inc. with a higher bid, according to the sources.
SK Networks plans to sign a memorandum of understanding with the Hong Kong-based investment firm for the sale.
SK Networks acquired a 42% stake in AJ Rent-a-Car for 300 billion won in 2019 and merged the company with its car rental business to create SK Rent-a-Car the following year.
The parent made SK Rent-a-Car a wholly owned unit to sell it following a public tender offer last year at 13,500 won per share and a swap of its treasury shares for a stake in the car rental company in January. For the tender offer, it estimated SK Rent-a-Car’s enterprise value at 600 billion won.
SK Rent-a-Car is SK Networks’ core unit as the subsidiary’s operating profit rose 28.3% to 122 billion won in 2023, about half of the parent’s profit, with sales up 12.5% to 1.4 trillion won.
SK Networks may seek more acquisitions of AI-related companies with the SK Rent-a-Car sale proceeds, according to sources.
The deal is also expected to provide much-needed cash to SK Group, which has been attempting to sell non-core assets to improve its liquidity conditions dented by a series of takeovers when interest rates were low, the sources said.
SK Rent-a-Car reportedly failed to create synergy with the targeted companies in the group's investment portfolio such as Turo, the top peer-to-peer car-sharing company, and SK Square Co.'s subsidiary Tmap Mobility Co., South Korea’s leading GPS navigation app operator.
TO RESUME M&AS IN SOUTH KOREA
Affinity is likely to seek more acquisitions in South Korea after the SK Rent-a-Car deal, investment banking industry sources in Seoul said.
Affinity is dealing with some persistent headaches. It has suffered from the weak earnings of Lock&Lock Co., a plastic container maker it acquired in 2017. Meanwhile, it has yet to sell Burger King’s operations in South Korea and Japan.