IMM agrees $124m exit from Korea's Hollys Coffee

KG Inicis is controlled by KG Group, which also owns KFC Korea. The KOSDAQ-listed company will acquire Hollys in an all-cash transaction, according to a filing. Rival bidders reportedly included SPC Group, TA Associates, and Elevation Equity Partners Korea. The transaction is expected to close at the end of October.

IMM acquired a 60% interest in Hollys in 2013 for KRW100 billion, according to AVCJ Research. However, local media reports state that the private equity firm invested KRW45 billion initially and built up to an approximately 92% stake for an additional KRW37 billion.

Hollys operated about 400 outlets across Korea at the time of IMM’s initial investment and has expanded its footprint to about 560. Overseas expansions have focused on China and Southeast Asia, leveraging the Korean Wave effect. The idea has been to position the chain as a cultural outpost by sponsoring K-pop concerts, featuring images of celebrities on menus, and allowing customers to play clips on screens in the restaurants.

Value-add efforts during the holding period otherwise focused on improving customer experience by redesigning dining rooms, updating the menu, revamping the membership program, and shifting from a franchise model to more direct ownership and management. There have also been bolt-on acquisitions such as rival brand De Chocolate. Annual revenue is said to have doubled during this period to KRW165 billion as of 2019.

Coffee is a fiercely competitive market in Korea, with competitors such as Hallyu Ventures-backed Caffe Bene operating as many as 1,600 locations. Starbucks, which began operations in Korea one year after Hollys in 1999, now has about 1,400 domestic locations. As of 2019, local leader Ediya had some 3,000 locations. According to Statista, total revenue in the segment is expected to grow at about 11% between 2020 and 2025.

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• Topics
• North Asia
• Trade sale
• Consumer
• South Korea
• IMM Private Equity