Industrial gas manufacturer Air First [Air First website]
Industrial gas manufacturer Air First [Air First website]

Capital markets are watching closely to see whether IMM Private Equity's continuation fund for industrial gas manufacturer Air First will surpass its fundraising target, as investor interest heats up.

According to investment banking industry sources Tuesday, IMM PE is raising capital to transfer roughly a 66 percent stake in Air First — currently held by its existing blind funds, Rose Gold No. 3 and No. 4 — into a newly formed continuation fund.

Air First's total enterprise value has been set at approximately 4.2 trillion won ($3.18 billion) for the transaction. However, the roughly 30 percent stake held by BlackRock, the global asset manager and Air First's second-largest shareholder, is excluded from the deal, bringing the overall transaction size to around 3 trillion won. After stripping out more than 1 trillion won in acquisition financing, the equity capital IMM PE must actually raise stands at approximately 1.8 trillion won.

A continuation fund is a structure in which a private equity manager transfers portfolio companies from an existing fund nearing maturity into a new vehicle, extending the investment period. It gives existing limited partners the option to exit or roll over their investment, while allowing the general partner to retain management of the asset and pursue further value creation.

IMM PE chose to hold Air First through a fund transfer rather than sell it to a third party, reflecting confidence in the company's growth prospects. Air First generates stable cash flows underpinned by long-term supply contracts and is expected to benefit from rising semiconductor capital expenditure driven by the spread of AI. The move is a strategic choice to maximize asset value while preserving trusted relationships with key customers as a critical node in South Korea's semiconductor supply chain.

Even so, the sheer scale of the equity raise — running into the trillions of won — combined with a higher valuation had been seen as the biggest hurdle for the fundraising. Air First's enterprise value has risen sharply since IMM PE first acquired the company in 2019 at around 1.4 trillion won. When the firm sold roughly a 30 percent stake to BlackRock in 2023, the implied valuation was about 3.7 trillion won; this time it has been set at 4.2 trillion won — about 500 billion won higher — leaving room for divided views in the market.

What dispelled those concerns was early moves by overseas investors. Singapore's sovereign wealth fund GIC and multiple global secondary fund managers conducted due diligence and signaled interest in committing between roughly 300 billion and 500 billion won each.

Those expressions of interest from global investors appear to have served as a benchmark. Major domestic pension funds and mutual aid associations are also positively reviewing re-investment and new participation, with indications of commitments in the range of approximately 1.5 trillion to 1.7 trillion won.

As a result, combined domestic and overseas LP commitments being explored at this point appear likely to exceed IMM PE's original fundraising target. The firm plans to close foreign LP proposals by the end of this month, finalize domestic LP commitments by the end of next month, and complete the final closing before year-end.

"Global secondary managers actively reviewed LP participation, and the valuation they arrived at effectively became a reference price," one investment banking industry expert said. "Domestic LPs used that as a firm basis for their investment decisions, which appears to have accelerated the fundraising."

Air First's stable earnings from major semiconductor companies as anchor customers also appear to have influenced LP decisions. "Air First has Samsung Electronics and SK hynix as its core customers, making it an asset that generates reliable EBITDA," another industry official said. "In an uncertain market environment, committing to a proven, high-quality asset backed by major customers is a far more stable and attractive choice than chasing less certain investments."


an@heraldcorp.com
park.jiyeong@heraldcorp.com