Key Takeaways
- • Gravity Private Equity and Otium Capital successfully exited their investment in seaweed specialty company Haenong after four years, generating approximately 30 billion won in proceeds from the sale of convertible preferred stocks and convertible bonds to UKC Partners.
- • The fund managers achieved an internal rate of return (IRR) of approximately 25% on their initial 10 billion won investment made in April and July 2022, demonstrating strong value creation in the portfolio company.
- • Haenong completed vertical integration of its operations from raw dried seaweed production through seasoned laver processing, with sales tripling from 28.2 billion won (pre-investment in 2021) to 87.4 billion won by the most recent fiscal year-end.
- • The investment thesis centered on capturing early-stage growth in seaweed export markets and supporting operational scaling through automation at the company's Mokpo facility, positioning Haenong for backward integration into raw material production.
- • The exit represents the first successful realization event for these co-managers in four years and reflects resilience through a 2023 macro downturn when raw seaweed prices spiked due to poor crop conditions, requiring active portfolio management engagement with management.
Summary
Gravity Private Equity and Otium Capital successfully completed their exit from Haenong, a seaweed specialty company, by selling all convertible preferred stocks (RCPS) and convertible bonds (CB) held through Otium Graphics PEF to UKC Partners. The transaction generated approximately 30 billion won in proceeds, marking the first realization event for these co-managers since their initial investment in 2022.
The fund managers deployed 10 billion won across two tranches in April and July 2022, targeting Haenong's strategic expansion into vertical integration. At the time of investment, the company was transitioning from solely processing seasoned laver to directly producing dried laver—the raw material—through establishment of a new production facility in Mokpo and process automation initiatives. This backward integration strategy aligned with the co-managers' thesis on capturing emerging growth opportunities in seaweed exports.
The investment generated an internal rate of return of approximately 25%, demonstrating substantial value creation over the four-year holding period. Revenue performance validated the operational strategy, with Haenong's annual sales increasing more than threefold from 28.2 billion won in 2021 (pre-investment) to 87.4 billion won by the most recent fiscal year-end. The fund managers maintained close engagement with Haenong's largest shareholder and CEO Cho Myung-chu throughout the holding period, particularly during a challenging 2023 macro environment when operating losses emerged due to elevated raw seaweed prices driven by sluggish crop conditions. This active portfolio management approach proved instrumental in navigating the temporary performance deterioration and ultimately supporting the company's path to profitability and successful exit.
The fund managers deployed 10 billion won across two tranches in April and July 2022, targeting Haenong's strategic expansion into vertical integration. At the time of investment, the company was transitioning from solely processing seasoned laver to directly producing dried laver—the raw material—through establishment of a new production facility in Mokpo and process automation initiatives. This backward integration strategy aligned with the co-managers' thesis on capturing emerging growth opportunities in seaweed exports.
The investment generated an internal rate of return of approximately 25%, demonstrating substantial value creation over the four-year holding period. Revenue performance validated the operational strategy, with Haenong's annual sales increasing more than threefold from 28.2 billion won in 2021 (pre-investment) to 87.4 billion won by the most recent fiscal year-end. The fund managers maintained close engagement with Haenong's largest shareholder and CEO Cho Myung-chu throughout the holding period, particularly during a challenging 2023 macro environment when operating losses emerged due to elevated raw seaweed prices driven by sluggish crop conditions. This active portfolio management approach proved instrumental in navigating the temporary performance deterioration and ultimately supporting the company's path to profitability and successful exit.
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