AFC Korea, a unit of Chinese private equity fund (PEF) AFC, will complete a due diligence to acquire STX Corp by the end of this week. Since the company and creditors seem to be in agreement, the deal is most likely to be closed in February. When AFC Korea takes over STX Corp., it will be the first acquisition of domestic trading company by Chinese capital.
According to investment banking (IB) industry sources on January 18, AFC Korea started conducting a detailed due diligence on the second week of this month and will complete it this weekend. As a South Korean base for China’s balanced regional development policy fund, AFC Korea is 3 trillion won (US$2.8 billion) worth of PEF established by China’s state-run companies, banks and government as investors. The headquarters in China was set up with funding of the Chinese government. It jointly operate numerous vessel funds with Taiwan’s largest container shipping firm Evergreen Marine as well as China’s major shippers.
AFC Korea established a project fund in its bid to take over STX Corp. China’s smartphone and electronic device manufacturers TCL and domestic company that run resort business joined the fund as investors.
The subject of settlement through the detailed due diligence is within 5 percent of 70 billion won (US$65.39 million) worth of the acquisition cost. About 68 billion won (US$63.52 million) worth of non-negotiable bond, which is a financial debt, is not the subject of negotiation because it will be paid back with STX capital. However, creditors and AFC Korea need to reach an agreement on whether to additionally extend the maturity of non-negotiable bond worth 370 billion won (US$345.63 million), which was extended to the end of this year.
Samra Midas (SM) Group was selected as a preferred bidder in March last year, but failed to buy STX Corp. in June on the ground of the low price. The sale includes STX Corp.’s 152,370,547 common shares held by financial institutions from creditors, including the Korea Development Bank (KDB), and 12,710,000 convertible shares that can be converted to common shares and don’t have the voting rights. The stake, including convertible shares, totals 86.3 percent.