Carlyle, Keppel, IMM stay in final race for Ecorbit

Carlyle Group, a union of Hong Kong-based Keppel Corp. and Gaw Capital Partners and a consortium of IMM Investment and IMM Private Equity are the three bidders remaining for South Korea’s largest landfill company Ecorbit Co., raising expectations of a speedy restructuring for the debt-ridden Taeyoung Group.  

According to sources in the investment banking industry on Friday, a consortium of IMM Investment and IMM Private Equity, Carlyle and a consortium led by Temasek-backed Keppel have submitted their bids for Ecorbit, forming a three-way race.

All four shortlisted bidders picked in June are still participating, with Gaw Capital teaming up with Keppel.

As the bid for the Korean landfill giant has drawn globally renowned investors, expectations are high that the restructuring of the cash-strapped Taeyoung Group will pick up speed.

Ecorbit’s full stake, 50:50 owned by Taeyoung and KKR &Co., was put up for grabs when Taeyoung filed for a debt workout in December last year to resuscitate the group saddled with 5.6 trillion won ($4.1 billion) in debt and loans it has guaranteed.

The 100% stake is estimated at 2.5 trillion won, or about 10 times its anticipated forward earnings before interest, taxes, depreciation and amortization (EBITDA) of 250 billion won for this year.

Combined with its net debt of 550 billion won, its enterprise value is estimated at 3 trillion won.

All three contenders have joined hands with banks for acquisition financing, worth about 1 trillion won, each. The IMM consortium will receive financing from NongHyup Bank, Carlyle from Hana Bank and the Keppel union from Kookmin Bank.

CASHCOW ECORBIT

Ecorbit is Korea’s landfill leader. It was set up in 2021 as a joint venture through a merger of KKR’s waste management company Eco Solutions Group and the Taeyoung-owned landfill operator and water management firm TSK Corp.

Taeyoung’s holding company TY Holdings Co. and KKR, respectively, hold a 50% stake in the JV, which specializes in water treatment, industrial and medical waste management and material recycling.

Taeyoung has vowed to sell its assets, including Ecorbit, to normalize its business after the group’s core business Taeyoung Engineering & Construction Co. (Taeyoung E&C) teetered on the brink of bankruptcy late last year due to its inability to repay its hefty debts amid the prolonged downturn of the construction industry.  

To ease the liquidity risk, the group sold its lucrative logistics company Taeyoung Industry Co. to KKR, reportedly for 240 billion won.

Earlier this week, the group also sold its headquarters building in Yeouido, Seoul’s main financial district, for about 250 billion won, while it is accelerating the sale of its leisure business BlueOne.

The group plans to use the proceeds from the disposal of Ecorbit to pay back Taeyoung E&C’s debts and ease the overall debt burden across the group.

The outlook for Ecorbit’s sale is rosy on growing market expectations for the landfill industry as mounting waste and the industry’s high entry barriers brighten the market outlook.

In March, Affirma Capital signed a memorandum of understanding to acquire Jentec for an undisclosed sum, two years after the country’s leading landfill operator was put on the market. 

Ecorbit's steady cash flow has also drawn interest from private equity firms like Carlyle, which has been lukewarm on Korean deals over the past few years.

UBS and Citigroup are managing the sale of Ecorbit. Taeyoung hopes to complete the sale within the year.

Write to Jun-Ho Cha at chacha@hankyung.com

Sookyung Seo edited this article.