Foreign Investors Coming Back?
by Brendon Carr
With the Korean presidential election coming up December 19, just three and a half months away, and the impending departure of President Roh Moo Hyun and his market-hating, anti-foreign investment Ship of Fools, foreign investor interest seems to be perking up. For the last five years Korea has been a bad place to do business—and it has turned positively horrible the last two years, with the government whipping up xenophobic backlash against Lone Star—but the probable December election of Lee Myung-bak promises some relief.
The UK’s Sunday Telegraph newspaper reports today that Britain’s largest buyout firm Permira is sniffing around the Korean market as a possible destination for its new £7.4 billion fund (about US$15 billion). As the Telegraph relates, Roh has done a hell of a job chasing away foreign investment:
The timing of Permira’s possible move into Korea may surprise people given sentiment towards overseas private-equity investors in Asia’s third-largest economy....
The furore over foreign investors has been partly responsible for some, including Texas Pacific Group, deciding to close their Seoul offices, although TPG remains keen to invest in the country. New York-based Warburg Pincus has also had difficulties in Korea, having been fined over a case relating to trading in shares in LG Card, the country’s top credit card issuer.
Permira seems to be a leveraged buyout (LBO) specialist looking for large deals. My guess is they’ll have to dip down into the mid-market, as Korean corporations’ valuations (unless they’re going to make a play for a POSCO or Samsung or something) tend to be lower than one would expect. The “mid-market” in the LBO arena is deals in the US$1 billion range, which for Korea would be a very big deal indeed. Except for the major commercial banks like Korea Exchange Bank and the aforementioned POSCO and Samsung, there aren’t a lot of billion-dollar companies available here.
Anyway, the run-up to the election promises a lot more of this kind of interest. It takes several months to a year to bring a Korean deal to a conclusion, so potential investors can still cut bait and run if somehow Chung Dong-Young or Kwon Young Ghil get themselves elected.
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Do you think there will be a nationalist backlash in domestic corporate circles that might affect the general elections?
For that matter, what is your take on opinions on this subject in South Korean corporate circles?
Do you think Lee Myung Bak will call off the Lone Star prosecution, given how much loss of face that would cause the prosecutors? Theyve really taken up the job with gusto, publicly and assiduously
On the other hand the Korean prosecution is totally politically controlled. In Germany the Prosecutor General is a lifetime appointment, and the person cant be fired by the executive. In Korea its a 1 year job with the option for re-appointment and dismissal at the whim of the President. What are the chances the Koreans ever reform this?
Yes, the Korean prosecution is completely politicized, and under the thumb of the executive. There has been much made of increasing the “independence” of the prosecution in recent years, but things like the Lone Star fiasco are telling. There is much improvement remaining to be done.
Thanks for finding some good news to report, even though it is contingent…