[Edaily Marketin, Reporter JI YEONG-EUI ] Controversy is brewing over the sale of “Timework Myeongdong,” a prime asset in Seoul’s Myeongdong district where funds from major institutional investors—including the National Pension Service, the Korea Post, and the Public Officials’ Mutual Aid Association—have been tied up for over seven years.

Suspicions have been raised among the existing limited partners (LPs) of Timewalk Myeongdong regarding whether the selection of the preferred bidder was fair. This is because the Goldman Sachs consortium—in which Aegis Asset Management, the selling asset manager, directly participated—was selected as the preferred bidder, even though a competing consortium reportedly offered a higher price and faster transaction closing terms.

“Was Aegis’s Selection as Preferred Negotiation Partner Fair?”… Limited Partners Raise Concerns Over Price and Closing Terms

According to the investment banking (IB) industry on the 19th, the team handling the sale of Aegis’s Timework Myeongdong selected the “Goldman Sachs–Aegis” consortium as the preferred bidder on the 12th. The competing bidder was the “Blue Cove Asset Management–Canada Pension Plan Investment Board (CPPIB)” consortium.

Following the selection of the preferred bidder, some existing limited partners (LPs) who had invested in Timework Myeongdong raised questions about the rationale behind the decision. Timework Myeongdong has received investments from major domestic institutional investors, including the National Pension Service, the Korea Post, the Public Officials’ Mutual Aid Association, the Science and Technology Personnel Mutual Aid Association, and DB Insurance. From their perspective, this asset has kept their funds tied up for seven years, as the sale was delayed due to the downturn in the Myeongdong commercial district caused by the COVID-19 pandemic following their initial investment in 2019. Given the prolonged period during which the funds were tied up, it is crucial for the LPs to recover their investments quickly at a higher price. However, questions have arisen regarding the selection process because the Goldman-Aegis consortium—rather than the competing consortium that appeared to have the edge in terms of price and closing timing—was chosen as the preferred bidder.

An LP official stated, “We were not given an explanation of the competitive terms offered by the two consortia; we were only told that the selected Goldman Sachs–Aegis consortium had an advantage in various conditions,” adding, “Looking at the terms of the competing bidder that were later disclosed, I question the criteria used to determine the preferred bidder.”

In fact, a review of the bid terms presented by both sides reveals that Blue Cove’s proposal had certain advantages. At the bid deadline on the 23rd of last month, Goldman Sachs proposed 535 billion won based on a share deal, while Blue Cove proposed 530 billion won plus an additional amount (α) representing tax savings. In an official interview on the 29th of the same month, when Aegis asked about the specific size of the α, Blue Cove replied that it was in the range of 7 billion to 8 billion won. Reflecting this, Blue Cove’s proposed price would be 537 billion to 538 billion won—up to 3 billion won higher than Goldman Sachs’ offer.

There were also differences regarding the closing date. Blue Cove proposed closing the transaction in November following an investment review at the end of October, with the option to extend the timeline by about one month. In contrast, Goldman Sachs’ initial proposal set the closing date for March 2027, though it was later understood that the firm had indicated in an official interview that the closing date could be brought forward.

However, Aegis explained that it excluded the 7 billion to 8 billion won mentioned by Blue Cove in the interview from the quantitative evaluation due to concerns over fairness, viewing it as a “post-bid price” submitted after the bidding deadline. The company calculated the internal rate of return (IRR) and investment multiples based on the figures definitively stated in the initial proposals—535 billion won for Goldman and 530 billion won for Blue Cove—and maintained that Goldman was ahead under these criteria.

What further fueled skepticism among investors and the market was the transaction structure in which Aegis participated simultaneously on both the selling and buying sides. Aegis, the fund manager of Timework Myeongdong, partnered with Goldman Sachs and was also listed as a member of the buying consortium.

In fact, it is not uncommon in the investment banking industry for a fund manager to participate as a buyer partner in the sale of its existing assets under management to ensure continuity of management. Aegis also maintains that Goldman Sachs is the actual investor, while Aegis serves merely as a domestic management partner.

However, there are circumstances under which the fund manager might not want the assets to be transferred to an external manager. If Goldman Sachs acquires the assets, Aegis can retain the management rights, assets under management (AUM), and management fee base for those assets. Given that this structure places Aegis in the dual role of a selling fund manager—responsible for maximizing the exit returns for existing limited partners (LPs)—while simultaneously holding a separate economic interest in retaining management rights, questions have arisen regarding whether conflicts of interest were properly managed during the selection process for the preferred bidder.

As controversy surrounding the criteria for selecting the preferred bidder continues, market attention is focused on Aegis’s evaluation criteria. Given that the transaction structure involved Aegis simultaneously serving as both the selling party and the acquiring partner, observers argue that Aegis needs to explain the specific procedures and criteria it used to determine the preferred bidder.

Aegis has flatly denied allegations that it selected the consortium in which it participated in order to retain management rights. The company maintains that it strictly enforced “Chinese walls” by separating the organization handling the sale from the one participating in the acquisition bid, and that it adhered to internal control procedures to ensure that competitors’ bid information was not disclosed to the buyer. Aegis explained that the selection of the preferred bidder was not based solely on the sale price, but rather on a comprehensive evaluation of the operational risks that the existing fund would bear if the transaction fell through, as well as the likelihood of the deal closing.

Aegis stated, “Price was not the deciding factor in selecting the preferred bidder,” adding, “There were several risks that could have disadvantaged the limited partners if Blue Cove had been selected. A difference of merely 2 to 3 billion won was not a risk we could afford to take.” Regarding the report to limited partners (LPs), they clarified, “We explained all relevant details to the investors’ representatives on the day of the bid and provided a summary of the information.”

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