A consortium led by Goldman Sachs Group Inc. and South Korea’s Daesung Group Partners Co. have embarked on the sale process of their combined 100 percent stake in Daesung Industrial Gases Co., to raise funds for the industrial conglomerate to pay off bonds that mature next year in return for surrender in management rights.

The sale comes two years after the Goldman Sachs consortium that includes private equity funds and financial investors purchased 68 percent stake in the industrial gas company in 2014.

An unnamed official from the investment bank industry said on Thursday that Daesung Group Partners Chairman Kim Young-tae has decided to give up his right of first refusal that would have been exercisable from the end of June 2018 and instead put the stake up for sale.

Kim’s decision is seen as part of efforts to stabilize overall business by promoting preemptive restructuring measures before the corporate value of Daesung Industrial Co. falls further. It would also help the group repay the company’s corporate bonds maturing in March and April next year.

Daesung Industrial Gases is a company that produces industrial gases such as nitrogen, oxygen, and argon, and is considered a core unit under Daesung Partners Group as it reaps stable revenue. A majority of contracts are long-term based - normally spanning 10 years - which guarantee stable income. Daesung Industrial Gases has been raising about 500 billion won ($440.5 million) in sales every year and in between 50 billion won and 30 billion won in operating income.

Even after the consortium led by Goldman Sachs purchased shares in Daesung Industrial Gases two years ago, the company has been managed by Daesung Group Partners. The chairman in particular has shown strong affection for the company that he placed Kim Shin-han, his third son and de facto heir of the group, as the company’s co-president.

Multiple sources from the investment bank industry estimate that the full stake in Daesung Industrial Gases will be worth around 1.5 trillion won considering management premium. They believe global industrial gas companies including Air Liquide S.A., Linde Group, Praxair Inc., and Air Products and Chemicals Inc. as potential buyers, along with local energy-related companies and private equity funds.

By Kim Hyo-hye

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