Question
the advantages and disadvantages of this deal in long details
note: if you are going to write the answer then make sure that the hand writing is presentable so i can understand it
KKR-led group buys Taiwan's LCY Chemical for US$1.56bil HONG KONG: KKR& Co said it is taking over Taipei-based LCY, Chemical Corp in a deal valued at NT$47.8bil (Us$1.56bil), part of a to "hidden champion" Taiwanese companies, in lower-profile and specialised industries getting exits and deals approved. Yang sald, been extremely focused on the process of Taiwan isn't frequently such as the chemicals sector, in which LCY is adding that this also caused some buyout uest by the giobal buyout firm for more the most focused-on transactions involving controlling stakes in the Greater China region market for private fore yesterday's share price surge, LCY The KKR-led as trading about seven times its 2017 earn- LCY employees and certain LCY foun A consortium led by New. Cork shares tr agreed to acquire all of LCY's shares for equity, but we do see other firms assessing ings before interest, taxes, depreciation and family members times at global peers, according to KKR esti- through mergers and acq compared to more than 10 based firm expand in intern NTS6 each, a 17.3% premium to last Friday's LCY has production plants in Taiwan, main- TaLCYvesterday, to NT$52 10% daily limit in Opportunities here. Taiwan isn't frequently the most focused- land China and the United States, the release on market for private equity, but we do see other firms assessing opportunities here, "Many of these said The LCY deal is part of KKR's effort to Paul Yang achieve a "healthy balance" between trans- actions in Greater China involving con- trolling stakes and minority deals, said Paul returning to Taiwan." Yang sald in an inter Yang, the buyout firm's Greater China chief viev companies are famly-con- privadisatons across the tinish line t ut s frs tn epand their grogaphc cover expect PE activity to pick up in the next two to We may be lucky to have one of the first nities to expand their business to a higher level globally,. Yang said. Many of KKR's previous deals in the region our Asian portfolio, but there's greater scope Global investors have faced chalilenges dis- the need for capital is secondary. They are The transaction is KKR's second in Taiwan Greater China portfolio." However, KKR's subsequent attempt to take between US$2bil and US$5bil, citing strong while MBK Partners Ltd faltered in attempts USS9 3bil Asia fund II. This is significant for KKR because we're China accounts for a significant portion of three ye transaction adds a different dimension to our nies in recent years Taiwanese firms with a market value of after previous attempts were unsuccess have involved minority shareholdings, he to focus on Taiwanese opportunities. This posing of their holdings in Taiwanese compa- realising that a global partner can help them Carlyle Group finally got approval to sell its The LCT deal is expected to close in the quarter, subject to regulatory approv following the purchase in 2007 of US$230mil Yang said he sees opportunities to invest in stake in Eastern Broadcasting Co in January fourth of convertible bonds in Yageo Corp deal and will arrange over the electronic-parts maker was rejected cash flows, reasonable valuations, anda ator China Network Systems Co. Private equity will be increasingly attracted "In previous years, the PE community has sortium, the
Explanation / Answer
Advantages: The deal will bolster and strengthen the efforts of KKR to strike the optimum balance between transactions in Greater China. The transactions that KKR is looking at are ones involving either controlling stakes or minority deals. China is a significant part of KKR’s Asian portfolio and deal further adds a new dimension to KKR’s Greater China portfolio. The LCY Chemical deal augurs well for KKR a it is able to invest in undiscovered companies that have good fundamentals, string cash flows, and most importantly reasonable valuations.
Disadvantages: Going forward KKR may face difficulties when it wants to exit its stake in Taiwanese companies. Historical precedents and latest deals suggest PE firms finding it difficult to offload their stakes and exit from Taiwanese companies in recent years. This may prove to be a big disadvantage for KKR and if they are not able to offload their stake, when they desire to do so in the future, then it will mean that KKR will not be able to make a profitable exit and that its capital and money will be tied and will not be freed up when desired or required.
