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Coffee Bean Korea seeks 100% stake sell-off

Oct 19, 2020 (Gmt+09:00)

South Korea’s popular coffee house Coffee Bean Korea Co. is seeking to sell a 100% stake in the company held by Chief Executive Officer Park Sang-bae and other shareholders, according to the investment banking industry on Oct. 19.

The coffee franchise has reached out to local strategic investors such as local bakery and confectionary giant SPC Group, alongside financial investors with management experience in the food and beverage sector.

The seller has proposed a price tag of around 150 billion won ($131 million) for the sale, combining the coffee chain’s enterprise value with a security deposit worth 75 billion won. 

Last year, the coffee chain posted revenue of 165 billion won and an operating profit of 100 million won, alongside EBITDA of 12 billion won. Coffee Bean Korea is expecting to see its enterprise valuation between 70 billion and 75 billion won given that the sale price of Hollys Coffee – an industry peer and local coffee chain that posted similar earnings –  was based on six times its 2019 EBITDA.

Coffee Bean Korea’s seller has told investors that all the Coffee Bean branches in Korea are directly managed, meaning that the security deposit can be retrieved at any time, ensuring a safeguard for buyers.

But potential buyers counter that the security deposit should not be fully reflected in the deal price as it is considered part of operating assets and not all of it can be retrieved.

“Coffee Bean Korea directly operates all of its brancehes, which may have taken a toll on the company dealing with expenses such as payroll and security deposits in the aftermath of the coronavirus. This is likely to have been a financial burden on the company, which is probably why it was put up for sale,” said a source from the F&B industry.

Coffee Bean Korea entered a master franchise agreement with parent company Los Angeles-based International Coffee & Tea, LLC. and launched its Korea operations in June 2000.

Meanwhile, Hong Kong-based private equity firm Anchor Equity Partners increased its stake in domestic coffee chain, A Twosome Place, to 85% after buying an additional 45% stake for 202.5 billion won in April from food and restaurant firm CJ Foodville Co. Ltd.

 
Write to Ri-ahn Kim at knra@hankyung.com

Danbee Lee edited this article.

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