NH Investment & Securities Co. aims to pool more than 500 billion won ($414 million) this year from financial services under NongHyup Financial Group to reinforce its private equity operation.
According to investment bank sources on Jan. 1, NH Investment & Securities reportedly will create a blind pool of at least 500 billion won through investment from NH units that manage combined assets of around 360 trillion won.
The addition would reinforce the company’s private equity fund capacity to 1.5 trillion won. The company is still looking for targets for 300 billion won in investments left in the current fund of 1 trillion won.
The brokerage house hopes to spin off the private equity fund operation once it becomes big enough. It has earned lucrative returns.In a consortium with Glenwood Private Equity, the company’s PE acquired Tongyang Magic for about 300 billion won in 2014 and sold the entire stake in Tongyang Magic for 610 billion won to SK Networks Co. in 2016. NH units involved with the deal, including NH Bank and NH Securities, earned more than 100 billion won from the deal.
NH Investment & Securities Co. pumped more cash into private equity funds (PEFs) in 2016 to further raise its investment returns. The securities firm has been highly encouraged by its successful deal involving Tongyang Magic and has decided to expand its PE operation.
According to sources on April 11, 2016, the stock brokerage firm will select three to four PEFs and invest up to 30 billion won ($26.1 million) each. Its targets will include funds being raised by asset managers like IMM Investment Corp. and VIG Partners.
NH Investment & Securities has received handsome returns from its investments in PEFs for several years.
The company invested about 20 billion won in VIG Partners’ No. 2 PEF, which successfully sold Burger King Korea. The brokerage firm received about 16 billion won in returns, including dividends of nearly 10 billion won, from its investment in the fund after VIG Partners sold Burger King Korea to Hong Kong-based private equity firm Affinity Equity Partners, making twice its original investment over the three years.
With its wider investment, the brokerage firm will gain the upper hand in winning orders from M&A customers. The company stood out in the local M&A market last year as it successfully brokered a deal to sell Homeplus, the largest M&A deal ever in Korea, and other high-profile M&A deals such as Halla Visteon and Ssangyong Cement.
A person familiar with the company said NH Investment & Securities has a strategy to leverage its investment into PEFs to expand its presence in acquisition finance offerings and M&A advice.
NH Investment & Securities is also seeking to push through various overseas projects to diversify IB business income sources. Recently, the company raised $320 million from Koran insurers and other institutional investors to lead a syndicated loan to Newark Energy Center’s power plant project in New Jersey.
In order to strengthen its PE facility operation, NHIS hired Yang Young-shik, former manager of the Strategic Management Office of National Pension Service, as head of its PE Headquarters, upgrading the position as the managing director from just director. Yang, a graduate of the Seoul National University College of Economy and Commerce, joined the NPS in 2005 and came up through the rank and file to become an expert on investment at home and abroad with NPS.
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