Gaw Capital, a Hong Kong-based real estate-focused private equity fund, will participate as a direct investor in the acquisition of Korean waste management company Koentec. With the decision to deploy its blind fund, the final contract for the Koentec acquisition is scheduled to be signed in January next year.
According to investment banking industry sources on December 29, E&F Private Equity and IS Dongseo, which are pursuing the sale of Koentec, plan to sign the final contract with Gaw Capital as early as January next year to complete the transaction. The acquisition price is reportedly in the high 600 billion won range ($440 million). The two sides also agreed on an earn-out provision, which provides additional payment upon meeting specific conditions. As the incineration plant permit—the condition in question—was immediately granted, they agreed to pay the earn-out amount simultaneously with the signing of the final contract.
Gaw Capital will contribute approximately half of the acquisition funds through direct investment and its previously established blind fund. Some had questioned Gaw Capital's fundraising capability due to its limited investment experience in Korea, as it was reported that a separate project fund would need to be raised domestically. However, the plan is understood to involve raising only acquisition financing in Korea.
Gaw Capital has been making investments through Gateway Blind Fund No. 7, approximately 4 trillion won in assets under management focused on real estate, infrastructure, and environmental assets in the Asia-Pacific region, as well as its Gaw Credit Fund for private debt investments.
Separately, Gaw Capital operates a "separate account direct investment" fund for direct investments in growth companies and platforms. Through this fund, the firm has previously invested in offices and residences in major Japanese cities and data centers in China, operating and developing them before reselling.
For the remaining half of the acquisition funds, Gaw Capital plans to arrange acquisition financing (stock-collateralized loans) from Woori Bank and Woori Investment & Securities. Gaw Capital reportedly set a condition to repay approximately 37 billion won in equity investment within one year of the loan. As a result, the loan-to-value ratio is expected to fall to the 50% range.
Gaw Capital competed against IMM Private Equity until the final stages. While the acquisition prices proposed by both sides showed little difference, Gaw Capital was selected for offering relatively more favorable terms to IS Dongseo, a subordinated investor in Koentec.
"Gaw Capital has been considering investments in Korea for a long time and showed strong commitment to this acquisition, with headquarters executives personally participating in due diligence," an industry source said.
