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Market expects Hahn & Co. to exit Hanon Systems soon

Hanon Systems factory in Pyeongtaek, Gyeonggi Province / Korea Times photo by Shim Hyun-chul
Hanon Systems factory in Pyeongtaek, Gyeonggi Province / Korea Times photo by Shim Hyun-chul

US firm's takeover considered best-case scenario

By Park Jae-hyuk

Stock investors are betting more on Hanon Systems with expectation that its largest shareholder Hahn & Company will unload its stake in the near future.

Hanon Systems shares closed at 16,550 won, Thursday, up from 11,550 won a month earlier.

The stock price hiked after the company was identified as one of the beneficiaries of the government's recent attempts to foster eco-friendly industries through the Green New Deal. Hanon Systems is an eco-friendly auto parts supplier for various carmakers, including Tesla and Volkswagen.

Some market analysts, however, attributed a steep rise in the price of the automotive thermal and energy management components to a potential M&A it will likely face soon.

"It has been five years since Hahn & Co. and Hankook Tire & Technology took over the company, so there is likelihood of an M&A," Samsung Securities analyst Lim Eun-young said, raising his target price to 19,000 won from 16,200 won.

The analyst mentioned an acquisition of Hanon Systems by a U.S. automotive company or private equity firm (PEF) as the best-case scenario, saying it will help the components maker enhance its customer portfolio.

"Unless the company is sold to a Chinese firm, Hyundai Motor Group will not oppose the M&A," the analyst said. The automotive group is the largest buyer of Hanon Systems' products.

Heungkuk Securities analyst Kim Gwi-yeon said Hahn & Co.'s possible sale of Hanon Systems will continue to make noise in 2021. The analyst raised the auto parts maker's target price to 18,000 won from 15,500 won.

In late 2014, Hahn & Co. acquired a 50.5 percent stake in Hanon Systems after forming a consortium with Hankook Tire. Given that PEFs generally pursue their exit strategies five years after taking over their portfolio companies, market participants are keeping a close eye on the buyout firm's next step.

Hahn & Co. has denied the rumor about its divestment. According to the PEF, the fund it used to acquire Hanon Systems will mature after several more years. It has also yet to sell its stake in Ssangyong Cement it bought five years ago.

Industry insiders said Hahn & Co. may face difficulties in selling Hanon Systems at this moment because the manufacturer's second-largest shareholder Hankook Tire is still facing a sibling feud over the tiremaker's managerial rights.

Hankook Tire, which holds a 19.49 percent stake in Hanon Systems, has the right of first refusal. This means it has a preferred right to acquire the Hanon Systems stake before Hahn & Co. sells it to anyone else. Industry officials expect Hahn & Co. will sell its stake to Hankook Tire after the tiremaker settles its family feud.

The valuation of Hanon Systems shares owned by Hahn & Co. is mentioned as another obstacle to immediate divestment. The company's market cap has already surpassed 8.8 trillion won.

Industry sources said only a few companies in China and India can afford to buy the shares for now. They said there will be a severe backlash if a Chinese company acquires Hanon Systems.


Hanon Systems factory in Pyeongtaek, Gyeonggi Province / Korea Times photo by Shim Hyun-chul
Hanon Systems factory in Pyeongtaek, Gyeonggi Province / Korea Times photo by Shim Hyun-chul

US firm's takeover considered best-case scenario

By Park Jae-hyuk

Stock investors are betting more on Hanon Systems with expectation that its largest shareholder Hahn & Company will unload its stake in the near future.

Hanon Systems shares closed at 16,550 won, Thursday, up from 11,550 won a month earlier.

The stock price hiked after the company was identified as one of the beneficiaries of the government's recent attempts to foster eco-friendly industries through the Green New Deal. Hanon Systems is an eco-friendly auto parts supplier for various carmakers, including Tesla and Volkswagen.

Some market analysts, however, attributed a steep rise in the price of the automotive thermal and energy management components to a potential M&A it will likely face soon.

"It has been five years since Hahn & Co. and Hankook Tire & Technology took over the company, so there is likelihood of an M&A," Samsung Securities analyst Lim Eun-young said, raising his target price to 19,000 won from 16,200 won.

The analyst mentioned an acquisition of Hanon Systems by a U.S. automotive company or private equity firm (PEF) as the best-case scenario, saying it will help the components maker enhance its customer portfolio.

"Unless the company is sold to a Chinese firm, Hyundai Motor Group will not oppose the M&A," the analyst said. The automotive group is the largest buyer of Hanon Systems' products.

Heungkuk Securities analyst Kim Gwi-yeon said Hahn & Co.'s possible sale of Hanon Systems will continue to make noise in 2021. The analyst raised the auto parts maker's target price to 18,000 won from 15,500 won.

In late 2014, Hahn & Co. acquired a 50.5 percent stake in Hanon Systems after forming a consortium with Hankook Tire. Given that PEFs generally pursue their exit strategies five years after taking over their portfolio companies, market participants are keeping a close eye on the buyout firm's next step.

Hahn & Co. has denied the rumor about its divestment. According to the PEF, the fund it used to acquire Hanon Systems will mature after several more years. It has also yet to sell its stake in Ssangyong Cement it bought five years ago.

Industry insiders said Hahn & Co. may face difficulties in selling Hanon Systems at this moment because the manufacturer's second-largest shareholder Hankook Tire is still facing a sibling feud over the tiremaker's managerial rights.

Hankook Tire, which holds a 19.49 percent stake in Hanon Systems, has the right of first refusal. This means it has a preferred right to acquire the Hanon Systems stake before Hahn & Co. sells it to anyone else. Industry officials expect Hahn & Co. will sell its stake to Hankook Tire after the tiremaker settles its family feud.

The valuation of Hanon Systems shares owned by Hahn & Co. is mentioned as another obstacle to immediate divestment. The company's market cap has already surpassed 8.8 trillion won.

Industry sources said only a few companies in China and India can afford to buy the shares for now. They said there will be a severe backlash if a Chinese company acquires Hanon Systems.


Park Jae-hyuk pjh@koreatimes.co.kr

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