KKR, Carlyle, Hillhouse race to buy Korean beauty device maker Classys

Global private equity giants such as KKR & Co., Carlyle Group and Hillhouse Capital Group Holdings are vying to acquire Classys Inc. as the South Korean medical aesthetic device maker is enjoying strong margins amid the global K-beauty craze, people with knowledge of the matter said on Tuesday.

Bain Capital LP, Classys’ top shareholder with a 60.16% stake as of the end of 2024, held a preliminary bid to sell its shares on March 14, according to the investment banking industry sources in Seoul.

The deal managed by Citigroup Global Markets Inc. and JPMorgan is estimated at 3 trillion won ($2 billion), given the Kosdaq-listed company’s market capitalization of 3.8 trillion won as of Wednesday. If sold at this value, the sale would be the largest merger and acquisition deal in the South Korean beauty industry.

Global financial investors, including those global private equity firms, and strategic investors participated in the preliminary tender, the sources said.

Potential buyers are conducting due diligence as the seller is expected to select a preferred bidder through a final tender in one to two months, according to the sources.

Bain bought a majority stake in Classys for 670 billion won in 2022.

TOP HIFU TREATMENT DEVICE MANUFACTURER

Classys, founded in 2007, is best known for the beauty device Shurink Universe, which uses high-intensity focused ultrasound (HIFU) for skin tightening. It is the country’s unrivaled leader in the HIFU treatment device market with 55% share.

The company’s net profit soared 31.5% to 97.6 billion won in 2024 from a year earlier as sales jumped 34.9% to 242.9 billion won. Its operating profit margin topped 50% last year, drawing interest from investors.

The medical aesthetic device business is one of the most profitable sectors as unit prices are high and manufacturers can continue to generate profits from related consumables and maintenance services.

Producers in the industry also have bargaining power as the segment has a high barrier to entry with its business-to-business model requiring medical beauty experts. South Korea’s exports of such devices are increasing.

TOO EXPENSIVE?

Despite the strong profitability and growth potential, the value of Classys may be overestimated, some investment banking industry sources said.

The estimated value is more than 20 times its earnings before interest, tax, depreciation and amortization (EBITDA) of 129.7 billion won in 2024.

South Korean private equity firms are also somewhat reluctant to acquire Classys in the aftermath of MBK Partners Ltd.’s handling of Homeplus Co., a Korean retailer that recently filed for court receivership, those sources said.

“Everyone is interested, but they tend to stay on the sidelines because of the price,” said one of the investment banking industry sources. “The takeover competition may weaken as the pool of buyers is limited only to the big funds.”

Write to Da Eun Choi at max@hankyung.com
 
Jongwoo Cheon edited this article.