Affinity buys majority stake in Korean food container maker

The deal comes from Affinity’s fourth pan-regional fund, which closed at $3.8 billion in 2014. The private equity firm recently launched its fifth vehicle, which has a target of $5 billion, according to sources familiar with the situation.

The primary seller is CEO Jun-il Kim, who founded Lock & Lock in 1978. He will transfer approximately 29 million shares – a 52.79% equity interest – to Affinity for KRW18,000 apiece, according to a regulatory filing. The private equity firm is buying a further 5.93 million shares, or 10.77%, from Chang-ho Kim for the same price. The deal values the business at KRW990 billion.

Following the announcement of the deal late on August 25, Lock & Lock’s stock closed up 25.1% at KRW16,200 on August 28. The company’s shares peaked at KRW47,900 in August 2011, but had broken KRW16,000 only once in the last three years prior to the disclosure of the Affinity deal.

"In order for the company to respond quickly to the global environment and progress as a global company, it is time for Kim to adopt a new vision and capabilities that exclude the influence of founders and the introduction of innovative management systems," Lock & Lock said, Yonhap News Agency reported.

However, Kim is expected to reinvest in the business once the deal closes and remain involved in its management in some capacity.

Lock & Lock launched its signature four-sided locking container in 1998. It now offers a range of food containers, cookware, thermoses, water bottles, and kitchen equipment. The company has also expanded beyond Korea, with production facilities in China and Vietnam and 11 overseas sales units. Lock & Lock exports to 119 countries and has 87 directly operated stores overseas.

The company's China business, which accounts for about 40% of overall revenue, suffered from declining sales in 2014 and 2015. As a result, the company restructured its sales channels. It switched from a direct supplier model to an agent-based model for hyper market sales and changed its home shopping strategy to focus more on online sales through e-commerce platforms like TMall and JD.com.

Once the restructuring was completed, Lock & Lock took another hit as political tensions between China and South Korea undermine sales. However, the company's online retail business, which has grown about 20% year-on-year over the past two years, made up for the shortfall.

Lock & Lock generated KRW425 billion in consolidated sales for 2016, up from KRW407.1 billion the previous year. Net income reached KRW46.9 billion, compared to KRW12.5 billion in 2015 and KRW14.9 billion in 2014.

Affinity's recent Korea-based activity includes the acquisition of a 24% stake in General Electric’s local credit card joint venture, Hyundai Card, for KRW376.6 billion. The private equity firm was supported by LP co-investors GIC Private and AlpInvest Partners.

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• Topics
• North Asia
• Buyouts
• Consumer
• South Korea
• Affinity Equity Partners