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Pre-IPO

Korea's largest H&B franchise launches pre-IPO targeting PEFs

Sep 03, 2020 (Gmt+09:00)

South Korean health and beauty franchise CJ Olive Young has sent teaser letters to potential buyers, including domestic and overseas private equity funds, to sell off a minority stake as part of its pre-initial public offering process, according to the financial investment industry on September 3.

CJ Olive Young reigns supreme in Korea’s health and beauty industry with 70% market share. It is also a subsidiary of family-controlled holding company CJ Corp.

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The stake amount has not been specified, but will likely be in line with the general pre-IPO financing range of a 20-30% stake.

Koo Chang-gun, CJ Olive Young's chief executive officer, announced the pre-IPO to company employees on Sept. 2, stating that it will help CJ Olive Young move forward and secure future growth opportunities. The company plans to go public by 2022.

During the announcement, Koo also made it clear that CJ Corp., CJ Olive Young's biggest shareholder, would not be selling its management stake. This means that the pre-IPO is expected to involve selling off shares held by the CJ Corp owner's family members.

In 2019, Korean conglomerate CJ Corp split its subsidiary CJ Olive Networks Co., into CJ Olive Young and an IT unit, of which the IT business was merged into the holding company. The spin-off rendered CJ Corp the biggest shareholder of CJ Olive Young with a 55.01% stake.

Through the split, CJ Corp Chairman Lee Jay-hyun’s son Lee Sun-ho, division head at CJ Cheil Jedang, was able to secure a 2.8% stake in CJ Corp. via share swap as he held a 17.97% stake in CJ Olive Networks.

Chairman Lee is the biggest shareholder of CJ Corp. with a 42.07% stake, and the National Pension Service is the second-biggest shareholder with a 9.96% stake.

There is market chatter that CJ Olive Young may be sold off as a whole, but a stronger consensus that CJ Corp. is set on maximizing share value through the IPO to boost enterprise value. Also, it is expected to help secure funding for the junior Lee’s succession to group management.

Shinhan Investment Corp. and Credit Suisse have been mandated as joint advisors. Due diligence is being done on CJ Olive Young as the selling company.

CJ Olive Young posted 365.9 billion won ($308.3 million) in revenue with an operating profit of 16.6 billion won in 2019.

By Ri-ahn Kim and Sang-eun Lee

knra@hankyung.com

Danbee Lee edited this article

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