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Private equity

Online retailer TMON eyes $337 mn from Korean PEF ahead of 2021 IPO

Chaeyeon Kim and Sang-eun Lucia Lee Sep 02, 2020 (Gmt+09:00)

South Korea’s e-commerce platform TMON Inc., majority-owned by KKR & Co. and Anchor Equity Partners, will likely receive 400 billion won ($337 million) in new investment from Seoul-based private equity firm PS Alliance.

The fresh funding is expected to pave the way for TMON to go public next year, which may lead to the top shareholders’ exit from the loss-making online retailer in over five years.

Both KKR and Anchor Equity are in final stages of talks with PS Alliance to sell 400 billion won worth of new bonds convertible into shares of TMON, short for Ticket Monster, according to investment banking sources on Sept. 2.

The fundraising is part of TMON’s efforts to become the country’s first listed e-commerce platform. In 2017, it withdrew its IPO plan due to poor financial conditions.

To revisit the initial public offering, TMON picked Mirae Asset Daewoo Securities Co. Ltd. as the IPO underwriter in April. Since then, it has been looking to raise up to 300 billion won through a rights offering, at the request of the Korea Stock Exchange, to bolster its negative capital base.

But the capital-raising plan has received a cool response from investors and large business groups who believed the country’s online commerce market has entered the mature stage after the ending of the so-called chicken games in the sector.

Given that concert and travel ticket sales account for 30% of its revenue, TMON has not benefited as much as its rivals from the non-contact business boom following the coronavirus outbreak.

tmon

RELIEF PITCHER AS CONTRARIAN?

But South Korea’s PS alliance has taken a contrarian view, betting on TMON’s growth in a smaller segment of the e-commerce market alongside its improving financial conditions.

TMON abandoned loss-making businesses such as fresh food sales last year. Instead, it narrowed its focus and adopted aggressive marketing campaigns.

To differentiate itself from bigger rivals such as Coupang Corp. and eBay Inc., TMON has introduced the marketing concept of Time Commerce, selling products at clearance prices in a short window of time. TMON turned to the black in March for the first time in its 10-year history.

During the second quarter ended in June, it beat rival Wemakeprice, a Korean unicorn, or a private company worth over $1 billion, in terms of customers. TMON’s customer base has risen to 11 million.

To increase its number of loyal customers, it will offer double discounts and more points or rewards under the customer loyalty program.

PORTFOLIO OF PS ALLIANCE

As a condition to invest in TMON, PS Alliance has secured the drag-along rights to sell its stake on the same terms as both KKR and Anchor Equity later on.

PS Alliance is raising money from domestic institutional investors to fund the investment. Thanks to offering a high 15% target return, the project fund was overbooked by institutional investors, the sources said.

In 2015, KKR and Anchor Equity jointly took a majority of TMON. Their detailed ownership was not disclosed.

If the fundraising from PS Alliance goes through, the deal will mark the first of its kind to be sealed between foreign and domestic private equity firms.

PS Alliance was formed in 2012 as a wholly owned unit of South Korea’s Poongsung Group, an automotive and electronic parts maker. It acquired a stake in a Korean storage tank rental company in 2014 and Korea Rental Corp. which rents IT Equipment such as desktops, laptops, printers and mobile devices, in 2019.

Cho Young-min, who joined PS Alliance as vice president in April, has been a bridge between the company and foreign private equity houses. During his stints at Korean Teachers’ Credit Union and Glenwood Private Equity as a structured finance expert, he managed investments in ADT Caps, Toshiba Memory, Halla Cement, Hankuk Glass Industries and SKC Kolon PI.

TMON reported a net loss of 118.8 billion won last year, versus a 136.3 billion won shortfall a year earlier.

Write to Chaeyeon Kim and Sang-eun Lucia Lee at why29@hankyung.com

Yeonhee Kim edited this article

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