MBK Partners' discussions to exit from its South Korean golf resort business Golfzon County are at the very early stages with potential bidders’ material interest unseen yet, sources familiar with the situation said.
Some investment banks have started gauging potential bidders’ interest and pitching ideas to allow the private equity house to exit after it abandoned the IPO plan earlier this year, they said.
Global sponsors such as infra-related funds are among the potential suitors given the precedent deals. The IPO plan, which it has put on the back burner, could be revisited at a later stage should the outright sale fail, two of the sources said.
The large deal size, with an estimated company valuation of more than KRW 2trn (USD 1.5bn), and limited domestic strategic bidder pool could be hurdles for the trade sale, the first source said.
The business would be too large for domestic sector peers which are mostly small- to medium-sized enterprises, he said. Internet giant Kakao Corp [KRX:035720], which owns a screen golf and related platform businesses, may be regarded as a potential buyer should it want to expand, he opined.
Most of the golf resorts are located quite far from the Seoul and the Gyeonggi-do area, and for some of the golf courses, it only has operating rights, not direct ownership. This could tarnish the target’s attractiveness as a property-based business, the second source said.
Still, the company has healthy cash flow, hitting record earnings last year with EBITDA of KRW 180bn, he continued. However, the border re-opening could lower demand from domestic golfers, gradually putting downward pressure on the profitability of the sector and the company going forward, he added.
A third source familiar with the situation countered, saying that Golfzon County is expected to see increased earnings, reaching an EBITDA of KRW 200bn this year. With about 70% of its 18 golf courses as directly owned assets, it is the only service provider engaged in operating and managing golf resorts in South Korea, he said.
MBK Partners invested in Golfzon County in 2018 and has rolled up the business through bolt-on buys of local golf courses. Out of 18 golf resorts across the nation, 10 resorts are directly owned, while it has operating rights for the rest, local media reports said. MBK Partners controls about a 70% stake in Golfzon, while Golfzon Newdin Holdings [KOSDAQ:121440] owns the rest.
Golfzon County was due to float by February 2023 following an IPO approval in August 2022, but it has not pursued the listing by the deadline. Samsung Securities [KRX:016360], NH Investment & Securities [KRX:005940], and Morgan Stanley were the lead IPO managers. It was reported by local media yesterday (23 May) that Golfzon County is being put up for sale.
Golfzon County recorded sales revenues of KRW 309.7bn and operating income of KRW 127.7bn in 2022, 15% and 21.8% up YoY, respectively, according to its 2022 annual report.
MBK Partners, Golfzon Newdin Holdings, and Golfzon County declined to comment.
Japan Score
MBK Partners has a track record of golf resort investment in Japan. It sold Accordia Next Golf to Fortress Investment Group for about JPY 400bn (USD 3.5bn) in November 2021.
In addition to Fortress, the target business had drawn multiple bids from other financial investors including KKR, Blackstone [NYSE:BX] Macquarie Infrastructure and Real Assets (MIRA), and Bain Capital, according to Mergermarket’s exclusive report in September 2021.
Golfzon County has a Likely-to-Exit (LTE) score of 51 out of 100, the second highest rank among MBK Partner’s portfolio companies, according to Mergermarket’s LTE model, which tracks the likelihood of sponsors exiting a portfolio company since the entry investment.
Note: Mergermarket’s proprietary Likely to Exit (LTE ) algorithm scores the likelihood of an exit in the next 12-24 months among private-equity-backed companies. The higher the score, the higher the likelihood.
