OTPP backs Korean fried chicken chain at $1.6b valuation

Sources familiar with the situation confirmed local media reports regarding OTPP’s participation, Elevation’s exit, and that MBK Partners would remain an investor in the business. OTPP, MBK and Elevation declined to comment on the situation.

OTPP – a longstanding LP in MBK’s private equity funds – is committing KRW310 billion in equity, while MBK and Hyun Jong Park, the company’s CEO, will rollover their stakes into a new holding entity, The Bell reported. Park also stands to receive KRW85 billion from the sale of existing shares, which he will reinvest in the business. The deal is supported by KRW850 billion in debt. Elevation stands to make a 2.6x return on its investment.

BHC is one of five companies that together have a more than 50% share of Korea’s fried chicken quick service restaurant (QSR) market. In 2019, that market was worth KRW6.8 trillion. BHC ranks second by revenue and number of restaurants and first by profitability, according to industry reports.

The Elevation team first invested in BHC in 2013, while part of Citi Venture Capital International (CVCI). They paid around $100 million for a majority stake. The Rohatyn Group acquired CVCI’s private equity business later the same year and then the Korea team spun out in early 2019 to form Elevation.

In late 2018, Park agreed to buy back TRG’s position at a valuation of KRW600 billion, with NH Investment & Securities providing debt financing and MBK covering the mezzanine tranche. The Elevation team also provided some equity funding via a project fund. MBK committed capital from its debut special situations fund and the firm’s exposure to BHC remains through that strategy.

When CVCI invested, BHC had 730 restaurants. During its holding period, the private equity firm supported an expansion to 1,400 outlets – almost all operated on a franchise basis – and a repositioning of the brand to capitalize on the gastropub phenomenon and draw in younger customers. Meanwhile, several bolt-on acquisitions saw the BHC umbrella group grow to 2,100 restaurants across four brands. EBITDA increased more than fivefold.

More recently, BHC has turned its attention to international expansion. The company opened its first fried chicken restaurant in Hong Kong in 2018.

Other private equity investment in Korea’s fried chicken QSR market includes VIG Partners’ acquisition of a majority stake in Bonchon in 2018. The company opened its first restaurant in Korea but now makes most of its money from international franchise operations, with more than two-thirds of its 300-plus outlets located in Southeast Asia.

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• Topics
• North Asia
• Consumer
• Expansion
• Trade sale
• South Korea
• OTPP
• MBK Partners
• Elevation Equity Partners