South Korea’s industrial gas market may see another major acquisition before year-end. The Korea Times has reported that Macquarie Infrastructure and Real Assets (MIRA) is nearing a deal to buy Daesung Industrial Gases.
Daesung is South Korea’s largest supplier of industrial gases used in the production of electronics, semiconductors, petrochemicals, metals and other industries. Its annual production capacity tops 15 million tons of these specialized gases.
The seller would be Seoul-based MBK Partners, Korea’s largest private equity firm.
If approved, Macquarie would become Daesung’s fourth owner in five years.
Specialty industrial gases—particularly nitrogen, arsine and phosphine—are widely used in the production of technology components such as semiconductors, favored for their distinct ease of storage and transport, and greater handling precision in industrial applications.
According to sources who spoke with the Times, the anticipated selling price is $2.2 billion, marking a premium to the $1.8 billion that MBK offered Daesung Group Partners and its then-largest shareholder, Goldman Sachs, to acquire the firm back in March 2017.
While sources at Macquarie and Daesung did not respond to Korea Times’s request for comment, reporters at the Korea Economic Daily cited unnamed sources familiar with the sale process that MIRA is currently in due diligence review, with a view to reaching a share purchase agreement (SPA) later this month.
High barriers to market entry and stable earnings outlook due to long-term supply contracts have made industrial gas producers a favored target of private equity investors.
Earlier this year, German industrial gases group Linde Group, which is publicly listed, sold its South Korean assets to Korea-based independent private equity firm IMM for $1.15 billion. The move came at the behest of South Korean trade regulators, whose approval of Linde’s $86 billion merger with Praxair was conditional upon one of the partners divesting its supply holdings of oxygen, nitrogen and argon gas in South Korea.
Reuters reported that Macquarie Group Ltd. was among the pool of bidders for those assets at the time.
Linde, meanwhile, has expanded operations throughout Asia. Last week, Linde announced a memorandum of understanding (MoU) with Baowu Clean Energy Ltd, a subsidiary of Baowu Steel Group, on joint research and development initiatives to build out the Chinese market for hydrogen-powered industrial and mobility applications.
Research from BCC as of 2018 forecasted growth in the global industrial gas market from $75.3 billion to $89.6 billion by 2023, growing at a 3.5% CAGR during the period.
Recent data indicates that South Korea’s industrial gas market has derived the largest share of its revenue in recent years from sales of nitrogen, oxygen and argon, although the country has also met significant global market demand for the fuel gas acetylene, which has historically been used as a welding fuel and as a feedstock for plastics.