Bain to invest in Korean botox manufacturer - update

The GP will acquire a stake of unspecified size from Tongyang HC, Hugel’s largest shareholder, for KRW472.8 billion, according to a filing. It will also be issued 985,217 new shares in the company at KRW360,000 apiece for a total consideration of KRW354.7 billion, and subscribe to a further KRW99.9 billion in convertible bonds.

Bain is expected to hold a 45% stake on completion of these transactions. The GP will fund the deal through contributions from its third Asia private equity vehicle and from Bain Capital Life Sciences, which invests in pharmaceutical, medical devices, diagnostics and enabling life sciences companies globally

The pricing of the new shares represents a slight discount to Hugel’s April 14 closing price. The company’s stock gained 8.8% on April 17, reaching KRW396,100 before it was suspended from trading. As of mid-morning trading on April 18, it was at KRW409,500, up another 3.4%.

Hugel was established in 2001, started pre-clinical testing for its botulinum toxin product in 2005, and started exports to Japan four years later. The company received KRW3 billion in private equity funding from IB Investment in 2008. AVCJ Research has records of three more rounds involving multiple investors, worth more than KRW100 billion altogether, between 2013 and 2015. Hugel listed in 2016.

In addition to a range of botox products – it is said to account for 30% of the Korean market – Hugel manufactures hyaluronic acid fillers used to remove facial wrinkles, facial masks, and skin recovery treatments. Revenue came to KRW124.2 billion in 2016, up from KRW65 billion the previous year, while net profit rose from KRW35.8 billion to KRW50.9 billion over the same period.

This is Bain’s second foray into Korea’s cosmetics space, following last year’s acquisition of a majority stake Carver Korea, in conjunction with Goldman Sachs. The combined investment was worth about KRW400 billion. Cosmetics is a popular target for private equity, not least because of the potential to leverage demand for high quality products overseas.

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