PAG joins race to buy Korean burger chain Mom's Touch

Pacific Alliance Group (PAG), a Hong Kong-based alternative investment firm, joined the bidding on Jan. 10 to acquire a 100% stake in South Korean homegrown burger franchise Mom's Touch & Co., according to investment banking sources.

Private equity firm KL& Partners, which wholly owns Mom's Touch via its special purpose vehicle Korea F&B Holdings, hoped to sell the burger chain at around 1 trillion won ($801.9 million) last July when it hired Bank of America Securities Inc. as a lead manager and prepared for the bidding process. The deal is expected to close at a lower price as buying fever has cooled over the past months, sources said.

The PE firm has been accelerating the bidding process since it replaced the lead manager with Deutsche Bank AG last October and redistributed the information memorandum, a document to provide a comprehensive overview of the target company, to prospective buyers in the following month.

Investment bank Goldman Sachs, US fast food giant Yum! Inc. and Korean conglomerate CJ Group didn't participate in the bid although they were said to have shown interest in the deal. CJ doesn’t plan to increase its dining brands, The Korea Economic Daily found.

TARGETING SECOND DEAL IN KOREA AFTER EXITING YOUNGTOYS

PAG manages $50 billion in assets for nearly 300 institutional investors worldwide as of June 30, 2022. The Hong Kong-based asset manager focuses on credit, real assets and private equity. 

The investment firm made its first deal in Korea in 2015 when it acquired Korean toy manufacturer Youngtoys Inc. for 220 billion won from Hong Kong-based Headland Capital Partners. In September 2020, PAG sold the toy maker at 148 billion won to a Korean consortium led by education company MiraeN and PE firms Nvestor and Corstone Asia. 

PAG has also considered acquisitions of Korean companies since then, such as makeup products company Hwasung Cosmetics, industrial gas supplier DIG Airgas, waste treatment firm Koentec and healthcare company Juvis. 

Founded in 1998, Mom's Touch has the largest number of stores, 1,363, among fast food franchises in Korea.

In 2021, the homegrown burger chain posted 44 billion won in earnings before interest, taxes, depreciation and amortization (EBITDA) and 39.5 billion won in operating profit, beating competitors McDonald's, KFC and Burger King in the local market.

From January to September of 2022, the homegrown burger franchise’s revenue amounted to 242 billion won, up 9.15% from the same period in 2021. Operating profits from the first three quarters of 2022 reached 36.7 billion won, up 25.53% from the same period of the previous year. The company is expected to post record-high earnings for 2022, exceeding those from 2021. 

Write to Ji-Eun Ha and Jun-Ho Cha at hazzys@hankyung.com
Jihyun Kim edited this article.