The Carlyle Group is in final stages of talks to buy South Korea’s No. 2 bakery chain Tous Les Jours from the country’s food and entertainment-focused CJ Group, which has been shedding non-core assets to shore up its bottom line.
Both sides are currently in the markup stage to finalize their contract adjustments with an aim to sign a share purchase agreement before year’s end, according to investment banking sources on Dec. 7.
The value of the potential deal has not yet been disclosed. Previously, sources had said CJ was demanding at least 300 billion won ($276 million) for the sale, while preliminary bidders valued the franchise at 200 billion won based on its EBITDA.
Carlyle was not among the group of four preliminary bidders: Singapore-based Affirma Capital; South Korea’s chemical and steel-focused KG Group; JKL Partners; and a consortium of NH Private Equity and Opus Private Equity.
Behind the upcoming deal were Hee-Jae Lee, CJ Corp.’s executive vice president and head of M&A, and John Kim, Carlyle’s managing director focused on Korea buyout opportunities.
The two have some history, having overlapped during their stints at Goldman Sachs. CJ’s Lee moved to CJ Logistics Corp. as M&A head in 2017 after working for Goldman Sachs and JPMorgan.
Carlyle’s Kim joined the private equity firm last year after spending 20 years at Goldman Sachs. The bakery chain deal, if closed, will mark his first buyout deal for Carlyle.
CJ Group has been privately tapping strategic buyers and PEFs to sell Tous Les Jours since last year, but failed to reach a deal due to price differences. CJ Group turned to a public auction to sell the bakery chain in August of this year.
CJ Corp. is the majority shareholder of CJ Foodville and the holding company of the group.
CJ Foodville Corp. is carving out the bakery chain, after it sold the coffee chain A Twosome Place to Anchor Equity Partners for 203 billion won last year.
Simultaneously, it is seeking to sell stakes in the health and beauty franchise CJ Olive Young and CJ Rokin, a Chinese logistics firm. Olive Young recently drew Goldman Sachs as a bidder, in a deal estimated at up to $405 million.
Deloitte Anjin is handling the sale of Tous Les Jours.
Carlyle expects to turn around the bakery chain, which has strong brand awareness, through cost-cutting efforts and business expansion. Tous Les Jours has a market share of 25.8% with 1,300 stores around the country.
With PEFs gaining clout in South Korea’s food and beverage market in recent years, Carlyle has been growing its presence in the country under the leadership of Kewsong Lee, of Korean origin, who was appointed as its sole CEO in July.
Earlier this year, the US PEF invested 200 billion won in bonds convertible into KB Financial Group shares as part of a strategic alliance, and agreed to launch the co-reinsurance business with Korean Re, the largest reinsurer in South Korea. It also exited from Yakjin Trading Corp., an original equipment manufacturer (OEM) for global brands this year.
Source: Korea Economic Daily