South Korea’s No. 2 fried chicken brand BHC Group has submitted a binding offer for the domestic operations of Outback Steakhouse, an Australian-themed restaurant chain, a deal expected to fetch at least 200 billion won ($180 million).
BHC, backed by the Ontario Teachers’ Pension Plan (OTPP) and private equity firm MBK Partners, is one of the two final bidders for a 100% stake in Outback Steakhouse Korea, according to investment banking sources on June 25.
The other bidder is a consortium of Seoul-based Daishin Private Equity and Yuanta Securities Korea Co., a unit of Taiwan’s Yuanta Financial Holdings.
Korean PE firm SkyLake Investments Co. and the sale manager Credit Suisse are planning to select a preferred buyer next week at its earliest.
BHC joined the race, half a year after it received an investment of 300 billion won from the Canadian pension scheme OTPP. Back in 2019, the chicken franchise was one of the five companies in which MBK Partners’ inaugural special situations fund had invested a combined $424 million.
MBK had participated in the 680-billion-won management buyout of the chicken franchise from US-based Rohatyn Group (TRG), led by BHC Chairman Park Hyun-jong in 2018. OTPP joined in a special purpose company used for the buyout.
This is the second attempt for SkyLake to sell Outback Steakhouse Korea. Last year, the PE house tried to sell the family restaurant chain, attracting other PE firms at home and abroad, alongside strategic investors. But it was scrapped due to price differences and other unknown reasons.
Should the sale go through this time, SkyLake is expected to pocket over fourfold its investment of 57 billion won in five years.
SkyLake’s premium strategy helped increase the restaurant’s brand value and its valuation. It has focused on upgrading the menu to boost sales revenue. The restaurant’s core menu offerings were replaced with more expensive, premium steaks, including Tomahawk, T-bone and L-bone cuts. Despite costlier transactions per table, the number of visitors has increased.
SkyLake is headed by Chin Dae-je, a former president of Samsung Electronics’ digital media business and ex-minister of information and communications in South Korea. He had an overlapping period in Samsung with BHC Group Chairman Park who had worked at the electronics giant for over 20 years until 2009.
Outback Steakhouse Korea is expected to diversify BHC’s business into foreign cuisines, while creating synergy with its Korean barbecue restaurants. BHC Group runs the crispy chicken brand BHC and four Korean food restaurant chains which, however, have yet to enjoy as much brand recognition as BHC Chicken.
The 100% stake in the Australian-themed restaurant chain is estimated at the higher end of the 200 billion won range. But the price tag could go up further, given the intense competition between the two bidders, the sources added.
The Daishin-Yuanta consortium is keen to buy the steak restaurant’s Korean operations that boast of loyal customers and steady sales growth, bucking the industry-wide slump.
Last year, Outback Steakhouse Korea racked up its largest-ever sales of 298 billion won even in the pandemic situation, up 17% year-on-year. Its 2020 operating profit shot up almost 40% to 23.5 billion won from a year earlier, driven by growing delivery services.
Meanwhile, SkyLake in 2020 raised 750 billion won in a blind pool fund that acquired copper foil and advanced materials maker Solus Advanced Materials Co., formerly known as Doosan Solus Co., and road management vehicles and equipment manufacturer, Retech.
Now, the Korean PE house is seeking to acquire a controlling stake in Daewoo Engineering & Construction Co. in a consortium with a domestic property developer DS Networks. The former construction arm of the now-defunct Daewoo Group is up for grabs by the state-run Korea Development Bank’s investment arm.