MBK in talks to buy S.Korea's top shoe fabric maker

MBK Partners is in exclusive talks to buy Dongjin Textile Co., a South Korean family-owned business that supplies footwear textiles to companies including Nike and Adidas.

The private equity firm has resumed negotiations three years after Dongjin's top shareholder and CEO Choi Woo-chul terminated talks with MBK in 2018 to pursue an initial public offering. But its IPO plan made no progress.

MBK is seeking to buy 100% of the country's biggest footwear textiles manufacturer, including a 36.69% stake held by Choi, the second-generation CEO from its founding family, according to investment banking sources on Nov. 29.

Dongjin also put up for sale its affiliated company Kyungjin Textile Co., 50%-owned by CEO Choi's son Choi Won-suk, in a package deal. 

The two small and medium-sized companies, based in the southern port city of Busan, are valued at a combined 700 billion to 800 billion won ($588 million-$672 million), or around 10 times their EBITDAs.

The estimated value is based on the price paid by VIG Partners to buy the country's No. 2 shoe fabric company Youyoung Co. in early 2018. The Seoul-based PE firm paid as much as 10 times the EBITDA of Youyoung.

Dongjin Textile, established in 1968, supplies textile materials and fabric to global shoemakers. Its founder Choi Byung-gil, born in 1929, handed over the company's management rights to his son Choi Woo-chul in 2004.

The company has experienced rapid growth since 2008, when it opened a factory in Vietnam and started directly supplying textiles to footwear producers with production facilities in Southeast Asia. It built a factory in Indonesia in 2019. Dongjin reports operating profit margins of over 20% per year.

Last year, Dongjin racked up an operating profit of 49.3 billion won on sales of 171.2 billion won on a consolidated basis. Its earnings before interest, tax, depreciation and amortization (EBITDA) reached 57.4 billion won, compared with Kyungjin Textils'e EBITDA of 12 billion won in 2020. 

Separately, MBK is set to acquire KoreaCenter Co., which helps create e-commerce websites for retailers, and Danawa Co., one of South Korea’s first-generation e-commerce platforms, in a transaction estimated at about 1 trillion won.

KoreaCenter last week acquired Danawa, which provides price comparison services, on behalf of MBK, which plans to buy both online platforms in a package deal. MBK will first buy existing and new shares of KoreaCenter, which in turn will use the proceeds from the share sale to buy into a controlling stake in Danawa.

Write to Jun-ho Cha at chacha@hankyung.com
Yeonhee Kim edited this article.