Goldman Sachs eyeing stakes in Olive Young
Goldman Sachs office in New York / Yonhap-EPA
By Kim Jae-heun
Following a number of private equity funds (PEFs) deciding to join the race to acquire a stake in Olive Young, Goldman Sach's PEF unit has become the latest to enter the fray, according to local banking industry sources, Monday.
“Goldman Sachs Principal Investment Area (Goldman Sachs PIA) Korea has become the latest participant as it was recently allowed to bid for Olive Young's pre-IPO shares,” an industry executive said.
Olive Young is the country's biggest health and beauty product retailer. Goldman Sachs PIA has appointed state lender Korea Development Bank's merger and acquisition team and Nomura Securities to oversee its bid, the sources said.
Goldman Sachs PIA and CJ Group declined to disclose details on the report. Olive Young is affiliated with CJ Group.
Already confirmed shortlisted candidates are Glenwood Private Equity, STIC Investment, IMM Private Equity, JKL Partners and Hyundai Department Store Group. The bidding process is likely to start sometime within mid-December.
Reports said Goldman Sachs' PIA decision was directly handled by its managing director Lee Jay-hyun. Lee was the key figure in the 40 billion won investment into Woowa Brothers six years ago. The value of the investment has skyrocketed 20 times since then.
It has not been decided who, among the family members of CJ Chairman Lee Jay-hyun, will sell their shares. Lee's oldest son Lee Sun-ho and Lee's younger brother Lee Jae-hwan are the most likely candidates, as they hold 17.97 percent and 10.03 percent stakes, respectively.
It is unlikely the chairman will sell all of Lee Sun-ho's shares as he is considered one of the candidates for the group's leadership.
In order to increase the value of the group heir's stake, the chairman needs to grow the company and list it on the stock market, according to sources. For this reason the deal guarantees an attractive exit strategy for buyers.
“The upside is not as high as the buyout deal ― it is worth investing as it has an exit structure. Also, some PEFs want to invest in the company itself as it has high cash flow as the top health and beauty product retailer here, and its plan to expand its online business has a bright outlook,” an industry source said.
CJ Olive Young plans to go public on the KOSPI in 2022, and CJ Group aims to sell off 30 percent of its stake, valued at between 300 billion won and 500 billion won. Investment banks sees the health and beauty product retailer's overall value at between 1 trillion won and 1.5 trillion now.
If one of the PEFs wins the bid, Olive Young's enterprise value is expected to soar.
Meanwhile, CJ Group's bakery franchise Tous Les Jours is failing to attract buyers as the company set its price too high. CJ Group suggested Tous Les Jours' earnings before interest, taxes, depreciation and amortization at 40 billion won, which is double the market estimate. The group's value is fixed at between 300 billion won and 400 billion won.
GS Retail and three PEFs ― KG Group, JKL Partners and Affirma Capital ― showed interest in the business in the preliminary bidding but they decided not to buy it later because of the high price.