Hana Fin buys Korean waste treatment firm with Asian PEFs

Hana Financial Investment Co. has acquired a small South Korean industrial waste treatment company in a consortium with two private equity firms, including Singapore-based Equis Developments, in a deal worth 86 billion won ($78 million).

They wrapped up the purchase after paying the remaining balance on Dec. 22, according to investment banking sources.

The transaction value of 86 billion won represents a 90% stake in Chong Song, which treats intermediate-level waste, as well as an investment in facility expansion.

The acquisition came after the three investment firms, comprised of Hana, Equis and Seoul-based Genesis Management, launched a 105 billion won fund this year to acquire four waste treatment facilities in South Korea for 290 billion won.

Hana participated as a limited partner in the fund that targeted a 20% internal rate of return.

The blind pool fund took a 90% stake in a special purpose company established by Genesis Management, in which Equis holds the remaining 10% as the operator of the waste treatment facilities.

They reportedly plan to boost the fund size to the trillion-won level to make bolt-on acquisitions of smaller waste treatment companies in Korea.

Established in 1998, Chong Song runs the only waste incineration facility in the city of Dongducheon, north of Seoul. Its sales have been growing at an annual rate of around 9% since 2017.

It has good access to the Seoul metropolitan area because of its location near a highway east of Seoul and a new circular road under construction around Seoul set to be built in 2023. A national industry complex will be established in the northern city by 2023, which may provide a stable supply of industrial waste to the company.

Genesis Management, founded in 2016, focuses on energy and infrastructure investment.

Rising waste volumes and higher garbage disposal prices underpin the robust outlook for waste management companies in the consolidating market. Further, high entry barriers to the regulated industry mean a limited supply of treatment facilities.

In October, KKR & Co. acquired a combined 440.8 billion won ($386 million) worth of shares in TSK Corp., a leading South Korean sewage and wastewater treatment firm, from three Korean companies, following a 875 billion won deal to buy two other Korean waste management companies in August.

Write to Chae-Yeon Kim and Seon-Pyo Hong at why29@hankyung.com
Yeonhee Kim edited this article.