IMM Private Equity, a Seoul-based private equity firm, will sell its controlling interest in Hana Tour Service, Korea's top travel agency, four years after acquiring it.
IMM PE has begun the process of selecting a lead manager for the sale of the 16.68% stake held by Harmonia 1, a special purpose vehicle established by IMM PE, investment banking industry sources said on Tuesday.
According to sources, if Park Sang-hwan, chairman and founder of Hanatour, and Kwon Hee-seok, senior vice chairman and co-founder of the company, participate in the sale process, the stake could rise to 27.78%. That's what it means.
Mr. Park and Mr. Kwon currently hold 6.53% and 4.48% of Hanatour shares, respectively.
Based on Hanatour's market capitalization of 1.13 trillion won, IMM PE's shares are worth 187.8 billion won ($140 million).
Shares of Hanatour, which is listed on the main Kospi stock exchange, rose 2.2% to close at 70,200 won on Tuesday, outpacing the 0.7% rise in the benchmark Kospi index.
According to people familiar with the matter, taking into account the management premium, the price of IMM PE's 16.68% stake is worth 300 billion won ($224 million).
Huge blow from the pandemic
IMM PE acquired shares for 128.9 billion won through a capital increase through shareholder allocation near the end of 2019, becoming Hana Tour's single largest shareholder. A private equity firm purchased Hanatour's shares for 58,000 won each.
However, like other travel companies, Hana Tours was hit hard by the outbreak of the COVID-19 pandemic.
Hana Tour's sales plummeted from 614.6 billion won in 2019 to 40.3 billion won in 2021. The company recorded an operating loss of 100 billion won from 2020 to 2022.
But the travel agency quickly recovered from its pandemic-induced woes and turned a profit last year.
In 2023, the company recorded sales of 411.6 billion won and operating profit of 34 billion won.
Reflecting the improvement in business performance, Hanatour's stock price has risen 74% from the low of 40,150 won in October 2023.
As the travel industry is suffering, Hana Tours has worked tirelessly during the pandemic to sell non-core businesses such as duty-free business and hotel business.
The company also reduced the proportion of offline packaged products and shifted its focus to online channels, which doubled the proportion of online sales to 40%.
According to industry sources, potential buyers for Hana Tour include South Korea's top travel and lodging platform Yanolja, accommodation reservation service Hotels.com, Chinese-owned travel service company Trip.com, and domestic and international buyers. Examples include private equity companies.
Write destination Cha Jun Ho Chacha@hankyung.com
In-Soo Nam edited this article.
