Blackstone-backed handbag maker Simone readies for IPO

South Korea-based luxury handbag maker Simone Acc. Collection Ltd. is pushing for an initial public offering this year, paving the way for the global private equity firm Blackstone to exit.

In 2015, the PE firm invested $300 million to acquire a 30% stake in Simone, which is likely to see its enterprise value reach at least 2 trillion won ($1.8 billion). In this case, it will double the value of Blackstone’s holdings, allowing the PE firm to pocket trillions of won.

Around six brokerage firms participated in the pitchbook presentation on Thursday, according to the investment banking industry on Feb. 25. The Korean company plans to kick off the IPO process after selecting two underwriters next month.

Simone is the first original development manufacturer (ODM) in Asia to have tapped into the luxury handbag manufacturing market.

The famous story linked with the Korean ODM company is that after establishing the company in 1987 with just 30 million won ($26,790), founder and chairman Park Eun-kwan approached US-based luxury brand Donna Karan New York (DKNY) to win supply rights.

Simone, specializing in luxury handbags, holds a comfortable lead in the global market, adding to its competitiveness. The company has a 10% market share in the global luxury handbag market and a 30% market share in the US. In addition to DKNY, the Korean company boasts a strong client portfolio of around 20 luxury brands, including Burberry, Marc Jacobs and Coach.

In 2019, the company reported around 1.2 trillion won in sales and 135.1 billion won in operating profit. Last year, the company didn't fare too well due to the global pandemic, which weakened consumer sentiment and imposed export restrictions.

Nonetheless, the company maintains a double-digit operating profit rate, a relatively high figure compared to the general fashion clothing industry.

The company's profitability is largely owing to its ODM portion, which generates added value and accounts for 70% of the total revenue. Simone has also been expanding its business by releasing its own brands, such as the multi-purpose commercial venue, 0914.

Simone’s enterprise value is expected to reach at least 2 trillion won when applying a price-to-earnings ratio of 20 times to its annual net income valued at around 100 billion won.

Meanwhile, the securities industry is closely watching the Korean company to see if it will be able to list this year, as this is the second attempt for Simone, which scrapped plans to go public in 2018 due to weakened performance.

Since then, the company has been through a restructuring, selling off its stake in the Guangzhou entity at the end of 2019 and liquidating the Qingdao office in January 2020.

“The company expects to see its earnings improve this year, so it shouldn’t be difficult to prepare for an IPO,” said an investment banking industry official. “The company’s strategy is to be evaluated as a brand company that makes high value-added premium products instead of as a manufacturer,” the official said.

Write to Ye-jin Jun at ace@hankyung.com
Danbee Lee edited this article.