Deal focus: Goldman, EastBridge cook up expansion plan

As one of the leading cookware manufacturers in South Korea, Happycall has received numerous approaches from PE over the last two years, but Hyun-Sam Lee, the founder and chairman, didn't want to sell. However, he was forced to review this position when attempts at overseas expansion floundered. Happycall derived only 10% of its revenue from foreign buyers, compared to 50-60% for some of industry counterparts.

Lee started looking for external assistance and EastBridge Partners convinced him that it could deliver on the expansion strategy. The domestic GP, which focuses on mid-market growth and buyout opportunities, agreed to acquire a 90% interest in Happycall for approximately KRW160 billion ($142 million). EastBridge paid $50 million for a 50% stake in the company, while Goldman Sachs, brought in as a co-investor, contributed $40 million for 40%. The remainder will be raised through debt financing. Lee's interest in Happycall has fallen to 10% from 89.5%.

"There is always something you can't do, so you want to borrow another's capacity. The key growth market for Happycall is China and Goldman has a strong network in the country, as well as in other international markets, so the company can leverage these resources to sell its products," says Kevin Lim, CEO and managing partner of EastBridge.

Established in 1999, Happycall manufactures frying pans, double-sided pans, ceramic pots and blenders under the Happycall, Chefel and Axlerim brands. It has a reputation for solid R&D capabilities, supported by more than 300 patents. "The beauty of Happycall is its product quality," Lim adds. "They have a strong development team and it usually takes them 2-3 years to develop and launch a new product. In Korea, it's not easy to win female customers. Housewives pay close attention to every penny they spend, as well as the quality of the products they are buying."

South Korea's kitchenware industry, including cookware, tableware and airtight containers, was worth about $2.6 billion last year, but it is highly fragmented, with non-branded products dominated accounting for more than three quarters of the market. Happycall is the largest player in the cookware segment, but it only has a 4% share, implying that it room for growth domestically.

Meanwhile, the company already exports to 22 countries and regions - including China, Europe, Japan, Taiwan, Indonesia and the US - and it plans to further penetrate into those markets through Goldman's network. Happycall's China strategy includes creating a dedicated subsidiary to control all distribution channels, while sales in smaller countries, such as Indonesia, will be through wholesale.

The company generated $130 million in revenue and EBITA of $13 million last year. Buoyed by overseas expansion, it is targeting revenue and EBITA for 2016 of $200 million and $30 million, respectively.

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• Topics
• North Asia
• Buyouts
• Consumer
• South Korea
• Goldman Sachs
• manufacturing