VIG set for 2.5x return as Affinity agrees to buy Burger King Korea

The private equity firm bought Burger King for KRW110 billion ($89 million), including debt, from domestic conglomerate Doosan Group in late 2012. Affinity will pay KRW210 billion for a 100% interest in the business. The deal came about after VIG received several unsolicited approaches from global and pan-regional GPs about the asset.

Doosan used to be primarily a food and beverage conglomerate, owning Oriental Brewery, Coca-Cola Korea, a pre-packaged food business and some restaurant chains. It began to shift focus in the early 2000s following the Korean credit crisis and made several divestments. Burger King and KFC - sold to CVC Capital Partners for KRW100 billion in 2014 - were the last two food and beverage assets.

Jason Shin, managing partner of VIG, sees Burger King as a classic Korean non-core asset: unloved and underinvested by the parent, leaving plenty of room for improvement once in private equity hands.

"Burger King is the poster child for underutilized, inefficient non-core assets held by chaebols that are outside of their main business area," he said. "It had a third-tier management who were not necessarily experienced in that specific industry. We brought in a top tier management experienced in the quick service restaurant business and then they live or die by the success solely of Burger King."

During VIG's ownership period, Burger King has expanded from 130 to 240 restaurants, but Shin says the impact of the change in management is really visible in average daily sales per outlet - they have risen by about 30%, contributing to improvements in overall revenue and EBITDA.

Despite adding more than 100 stores, there is still thought to be room for growth in the domestic market. Burger King is one of three nationwide burger chains alongside McDonald's and Lotteria, which have 415 outlets and more than 1,000 outlets, respectively.

This the first full exit from VIG's second Korea-focused fund, which closed at $350 million in 2014. The combined proceeds of the Burger King sale and dividends generated by other portfolio companies amount to more than two thirds of the total invested capital. The fund holds an additional five assets, including Winche, a manufacturer of PVC windows, and Bodyfriend, a massage chair producer.

Last year, VIG sold its majority stake in Tong Yang Life Insurance to China's Anbang Insurance Group in a KRW1.13 trillion deal. The firm originally invested in Tong Yang through its first fund and then raised a project-specific vehicle to support the acquisition of the majority position.

VIG is understood to be in the process of raising its third full fund, which has a target of $500-600 million.

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• Topics
• North Asia
• Consumer
• Trade sale
• Buyouts
• South Korea
• Affinity Equity Partners
• Consumer
• buyout
• Trade sale
• Exit
• VIG Partners