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Race for CJ Olive Young IPO underwriting deal heats up

Brokerages’ valuations double earlier estimates, stoking overvaluation concerns

By Nov 09, 2021 (Gmt+09:00)

Race for CJ Olive Young IPO underwriting deal heats up

The competition to underwrite a listing of CJ Olive Young, South Korea’s top beauty store chain, is intensifying with some brokerage houses valuing the company at over $3.4 billion, more than double earlier estimates.

Investment banks were known to be going for broke to win the deal as the initial public offering is linked to the succession of the country’s food and entertainment conglomerate CJ Group, according to industry sources.

CJ Olive Young is scheduled to open up a round of competition to select IPO managers this week, according to the sources on Nov. 8. Credit Suisse, JPMorgan, Korea Investment & Securities Co., NH Investment & Securities Co.,  Mirae Asset Securities Co., Samsung Securities Co., and KB Securities Co. are set to join the race.

CJ Olive Young aims to select four underwriters, including two foreign brokerage houses, by the end of this month for a plan to go public in 2022.

Most of the participants were known to have valued the company at around 4 trillion won ($3.4 billion). Brokerage houses that had put its enterprise value at around 2 trillion-3 trillion won were eliminated from the candidate pool.

“CJ Group is determined to maximize the values of its affiliates,” said a source at a brokerage house. “Brokerages are doing their best to prove corporate valuations with their own evaluation models and analysis.”

Some critics saw their valuations as excessive since domestic consumption has yet to recover from the COVID-19 pandemic.


CJ Olive Young's IPO had been expected to put the company's enterprise value at more than 2 trillion won, slightly higher than the 1.84 trillion won valued by Glenwood Private Equity when it took a 22.56% stake for 414.1 billion won in late 2020.

CJ Group's heir apparent Lee Sun-ho and his sister Lee Kyung-hoo, CJ ENM vice president, secured 101.8 billion won and 39.1 billion won, respectively, by selling some of their stakes to Glenwood. Lee Sun-ho’s stake fell to 11.09% from 17.97% and Lee Kyung-hoo’s stake shrank to 4.26% from 6.91%.

If CJ Olive Young is listed at a corporate value of 4 trillion won, the value of Lee Sun-ho’s stake is expected to jump to 450 billion won. The value of Lee Kyung-hoo’s stake is also predicted to surge to 170 billion won.

“Private equity funds and venture capital firms that invested in pre-IPOs have no choice but to raise corporate values because they expect profits of more than double,” said an IB industry source. “This is a win-win deal since the CJ Group owner family will lose nothing from their stake sales and financial investors will be able to recoup their investments.”


CJ Olive Young logged 168.5 billion won in earnings before interest, tax, depreciation and amortization (EBITDA) last year, up 4.6% from 2019, although its revenue dipped 4.4% to 1.9 trillion won. Its sales and EBITDA are forecast to grow 8% and 3%, respectively, in 2021, according to analysts.

The company’s enterprise values are expected to depend on the success of its conversion to an online platform, brokerage industry sources said. The company dominated the local market with about 1,200 stores across the country, while its competitors reduced offline shops. But those offline stores could be a risk, given the increasing preference for online shopping.

It is expanding its online business with sales events and delivery services. Online sales accounted for 23.4% of the total revenue in the second quarter, increasing from 14.4% in the previous three months.

CJ Olive Young’s valuation may be limited once it is categorized as a conventional retailer rather than a health & beauty platform, IB industry sources said. An expected corporate value of 4 trillion won is forecast to reach 20 times of EBITDA if the company reports about 200 billion won in earnings this year. Corporate values of ordinary retailers are often estimated at 8-10 times of EBITDA.

“When MBK Partners acquired Homeplus, its value was around 10 times of EBITDA. It is questionable if CJ Olive Young is valued at more than 20 times,” said an industry source. “Brokerages made such high bets to win the underwriting deal and the situation may change when it is listed.”

Write to Ye-Jin Jun at

JongwooCheon edited this article.

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