IMM PE to sell Hollys Coffee to Korean chemical-to-steel group

Seoul-based IMM Private Equity is in the final stages of talks to sell South Korea’s Hollys Coffee to the country’s chemical- to steel-focused KG Group, in its third attempt to exit from its 82 billion won investment in the coffee house chain.

The private equity firm will sign a share purchase agreement around the end of this month with KG Group, which outbid two to three other final bidders to boost its share in the food and beverage market, according to investment banking sources on Sept. 9.

The sale price will be in the range between 150 billion won and 200 billion won ($126 million and $168 million), or three to four times 2019 EBITDA of 47.4 billion won. This compares to a multiple of 10 for milk tea brand Gong Cha and a multiple of 13 for A Twosome Place paid by their buyers last year.

The transaction, if completed, will mark IMM’s exit from the Korean investment in seven years since it acquired the coffee chain in 2013. It had injected a combined 82 billion won into Hollys for the acquisition and rights offering and already recovered the investment through dividend incomes and refinancing.

Since the IMM acquisition, Hollys has increased the number of its outlets to 560 nationwide from 384 in 2013. Revenues have more than doubled to 165 billion won last year, versus 68 billion won in 2013.

For KG Group, the prospective acquisition will come on the heels of its purchases of fast-food franchise KFC Korea in 2017 and Dongbu Steel Co. Ltd. in 2019.

Goldman Sachs is handling the sale of Hollys Coffee.

Last year, US private equity firm TA Associates bought Taiwan-style milk tea brand Gong Cha from Unison Capital Inc. for around 350 billion won. Hong Kong-based Anchor Equity Partners acquired A Twosome Place, a coffee house chain, for 202.5 billion won from the CJ Group in 2019.

Write to Jun Ho Cha at chacha@hankyung.com