Golfzon County IPO poised to be another MBK success story

Golfzon County Co. is gearing up for an initial public offering, which will offer MBK Partners a chance to exit from its investment in South Korea’s largest golf course operator with decent returns.

Golfzon Country on Friday submitted its application for a preliminary review of its IPO plan to the Korea Exchange with a view to going public by the end of the year.

NH Investment & Securities Co. and Samsung Securities Co. are jointly managing the IPO.

The enterprise value of the golf course management company is said to be close to 3 trillion won ($2.4 billion), a threefold increase from its establishment in 2018 when it was valued at around 1 trillion won. It was spun off from Kosdaq-listed Golfzon Newdin Holdings Co. at the time.

“The company’s recent sales and other profitability indicators all beat market expectations. We expect it to be capitalized at around 2.5 trillion won upon listing as we also take into account the routine discount rate during the IPO price evaluation process,” said an investment banking industry official.

RAPID GROWTH WITH ADD-ON INVESTMENT

After making a series of golf course acquisitions in the country over the past few years, Golfzon County now runs 18 golf courses across the country.

The company’s earnings and sales revenue have also grown rapidly as the golf industry thrived in the COVID-19 pandemic.

It posted an annual average revenue growth rate of 61.7% over the past three years, leading to record sales of 268.9 billion won on a consolidated basis last year. Operating profit stood at 104.8 billion won with a profit margin of 39%.

MBK Partners, one of Asia’s largest private equity firms, acquired a 50% stake in Golfzon County for 114 billion won in 2018 and raised its investment to a total of 288 billion won by participating in four rounds of rights offerings afterward.

Analysts said its add-on investment method proved successful as it acquired unprofitable gold course operators at a bargain and collectively turned them into lucrative businesses by achieving economies of scale.

The planned IPO will give MBK an opportunity to sell part of its stake in Golfzon County. Industry watchers said the private equity firm will be able to see a fourfold increase in its return on investment.

Following MBK’s divestment, Golfzon Newdin Holdings will become the golf course operator’s largest shareholder.

HIT THE JACKPOT

MBK’s expected partial exit from Golfzon County follows its sale of Japan's largest golf course operator Accordia Next Golf to SoftBank's Fortress Investment Group for 400 billion yen ($3.5 billion) in November 2021.

The exit created more than a threefold return for the North Asia-focused PE firm, one of the largest capital gains in Japan's M&A market last year.

MBK acquired a majority stake in Accordia Next Golf for 85.3 billion yen in January 2017, jointly with a Canadian institutional investor, from Goldman Sachs, which also employed the add-on investment strategy to take over bankrupt golf course operators and turn them around before resale.

MBK Partners founder and Chairman Michael ByungJu Kim picked Accordia Next Golf as a case of its successful add-on investment.

Last year, MBK achieved a double-digit internal rate of return, or billion-dollar returns, from three divestments in Asia – Japan’s Accordia Next Golf, China's Apex International Corp. and South Korea's Doosan Machine Tools.

Write to Seok-Cheol Choi and Ye-jin Jun at dolsoi@hankyung.com
In-Soo Nam edited this article.