Carlyle set to take over CJ's bakery franchise

A Tous Les Jours employee hangs the Halal food certification it received from Majelis Ulama Indonesia at its store in Indonesia in this January file photo. / Courtesy of CJ Foodville

By Kim Jae-heun

Carlyle Group is in final discussions with CJ over a planned acquisition of CJ's bakery franchise Tous Les Jours, to iron out differences over the valuation of the affiliate, according to a source at a U.S.-based investment bank, here, Wednesday.

“CJ was asking Carlyle to pay 350 billion won including a management premium, while Carlyle has offered below 300 billion won citing the negative impact of the continued spread of COVID-19 on CJ,” the source said.

“Carlyle has shown great interest in acquiring Tous Les Jours since it was put on the market. However, it looks like it will take some time to adjust the price since each side has a different one in mind,” he added.

Regarding Carlyle's approach to Tous Les Jours, CJ officials said; “We can say, yes, talks are underway for the sale of Tous Les Jours. But we can't make any additional comment on the matter.” There have been rumors the two companies are aiming to sign a stock purchase agreement by the end of the year.

Carlyle was not a strong candidate initially. CJ Foodville had been in contact with local private equity funds (PEFs) such as JKL Partners and Affirma Capital until they decided the asking price was too high.

While local PEFs were seeking an upside by reducing common costs and streamlining, international PEFs evaluate the bakery franchise's growth potential in overseas markets as an attractive factor.

However, the cost-cutting effect of reducing common costs would not be that large; therefore it makes better business sense to sell to a foreign PEF that can use Tous Les Jours' enterprise value for growth globally with the potential for a better resale price later.

Tous Les Jours has had an average 400 billion won in annual sales with 80 billion won coming from overseas markets including the United States. However, apart from its business in America, the bakery franchise is continuously recording losses in other countries such as Vietnam and Indonesia.

The management rights to its overseas branches in Beijing, Shanghai and Zhejiang have already been handed over to local PEF, Hosen Capital.

“It is true that Tous Les Jours has been shunned by local buyers due to its low profitability. Considering that it operates a number of branches overseas, its marketing campaign should have focused on foreign buyers in the first place,” another source said.

CJ Group decided to sell several non-core assets of CJ Foodville due to worsening profitability. Tous Les Jours is the country's second largest bakery franchise with about 1,300 local stores. CJ Group had contacted domestic and foreign strategic investors and PEFs over the sale of since last year, but switched to open bidding in August.