Hahn & Co. buys Korean food startup in bolt-on deal

Seoul-based private equity firm Hahn & Co. has acquired a South Korean meal kit provider for 75 billion won ($61 million), a deal expected to boost the value of the country's No. 1 inflight catering service company.

Korean Air Catering & Duty Free Services Co., 80% owned by Hahn & Co., recently signed an agreement to buy more than a 95% stake in MyChef, according to people with knowledge of the matter on April 11. 

Based on an enterprise value of around 100 billion won, Hahn will buy both existing and new shares of MyChef by the end of this month.
 
The acquisition comes two years after the PE firm purchased an 80% stake in Korean Air Catering, which runs inflight catering and duty-free services, for 790 billion won in 2020.

Korean Air Lines Co. had sold a majority of the business to enhance its financial conditions. The flag carrier holds the remaining 20% stake in the unit.

Hahn & Co., led by ex-Morgan Stanley banker Scott Sang-Won Hahn, decided to buy out MyChef, betting on growth in the meal kit service market. Initially, it had considered buying just a 10% stake in the food company.

Meal kits, or premade meals, are expected to lead the market of home meal replacements, which are quickly penetrating Korea's kitchens and dining tables.

The acquisition of MyChef will likely help the inflight catering company reduce the costs of ingredient procurement, as well as improve its product development and productivity.

Korean Air Catering supplies inflight meals to other air carriers, including Air Canada, Air France, Singapore Airlines and Cathay Pacific.

For MyChef, the deal is expected to diversify its customers. Founded by CEO Im Jong-eok in 2011, the company serves over 200 types of meals.

Preparing meals is usually manual labor. But MyChef plans to automate its production and cut production costs. It also hopes to increase its daily production volume by three to four times to over 100,000 kits.  

It will use the fresh funding from the new share sale to Hahn & Co. to finish building automated production lines under construction near Seoul. Once completed, MyChef will become the first Korean meal kit provider with an automated system.

VALUE INCREASE 

With $10.1 billion in assets under management, Hahn & Co. is known for the bolt-on acquisition strategy for its portfolio companies.

Since it took over Hanon Systems Corp., a heat pump systems supplier for carmakers, for 2.8 trillion won ($2.3 billion) in 2014, it purchased the fluid pressure and controls business of Canada's Magna International Inc. for approximately $1.2 billion in 2018.

Last year it put Hanon Systems on the market, for which industry insiders expect will fetch around 8 trillion won, more than three times its acquisition price. 

In the case of Woongjin Foods Co., Hahn & Co. bought the Korean food company for 115 billion won in 2013. In the following years, the PE house took over a domestic confectionary company and a juice producer to increase Woongjin's value.

In 2018, Hahn & Co. sold Woongjin Foods to Uni-President Enterprises Co., a leading Taiwanese food brand, for 260 billion won.

Write to Si-Eun Park at seeker@hankyung.com
Yeonhee Kim edited this article.