Goldman exits Korean beauty startup without profit

Goldman Sachs has divested of its stake worth 75 billion won ($62 million) in South Korea's cosmetics startup GP Club Co. without a profit due to declining sales at the beauty company, according to people with knowledge of the matter on Thursday.

Goldman Sachs Special Situation Group (ASSG) recently exercised a put option granted when it acquired a 5% stake in GP Club in October 2018. It recouped the investment principal plus an interest of 5% for the period of three and a half years.

GP Club was Goldman's second investment in South Korea's beauty industry, following its impressive triple-digit return from the 430 billion won injection into a skincare brand Carver Korea back in 2016, jointly with Bain Capital.

In the following year, the consortium of Goldman and Bain sold Carver Korea to British consumer goods brand Unilever PLC for 3 trillion won.

Back in 2018, ASSG bought the GP Club shares from its founder and CEO Kim Jung-woong and his wife Park Oak and became its fourth-largest shareholder. Along with the investment, it received an option to sell them back to the company, if the startup fails to go public within a certain period of time. 

The investment valued GP Club at 1.5 trillion won and propelled it to the status of the country's ninth unicorn, or a private company with an enterprise value of $1 billion or more. 

EARLIER THAN EXPECTED EXIT

Goldman's exit came earlier than expected. The US investment bank played down the likelihood of GP Club getting listed at as high a valuation as it had expected, according to the sources.

Starting as a game distribution company in China in 2003, GP Club made its name as a cosmetic brand, JMSolution, launched in 2016. Especially, its facial sheet masks, which the company claims contain honey nutrition, made a huge hit in China, selling over 600 million sheets there.

But it took a hit from COVID-19 lockdowns and China's ban on the imports of South Korean products, after Seoul agreed with Washington to build and install a missile shield system known as Terminal High Altitude Area Defense (THAAD) in South Korea.

Recently, the company failed to raise 200 billion won in pre-IPO funding, in which a number of Seoul-based private equity firms such as PS Alliance and StoneBridge Capital had considered participating.

Its potential PE investors backed down due to its lowered valuation, the sources said.

Operating profit at GP Club more than halved to 97.4 billion won in 2021, versus 203.8 won in 2018. Sales decreased to 404.4 billion won from 513.7 billion won during the same period.

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