MSPEA completes quiet Korea acquisition

In actual fact, the transaction - which recently closed - involved five unlisted entities as well: tissue paper manufacturers Ssangyong C&B and Monalisa Daejeon, and then three ancillary companies in the logistics, raw materials procurement and sales personnel management spaces. MSPEA took full ownership of each of these from CEO Kwang-ho Kim.

"The only public information was on the listed entity, so it appeared to be a $80-90 million deal, but the entry valuation was $215 million," a source familiar with the transaction told AVCJ.

There was good reason for the low profile. Kim was considering retirement, and in the absence of a natural heir, he wanted to explore sale options - but away from the spotlight that inevitably follows an auction process.

This was in part a union issue. As illustrated by the recent strike that cost Hyundai Motor KRW1 trillion ($910 million) in output, unionized workers are tough negotiators. Had news of a Ssangyong-Monalisa sale emerged, the unions could have used it as leverage.

MSPEA was helped by its familiarity with the paper business and with owners who like a quiet sale process. The PE firm led an acquisition of Jeonju Paper in 2008 and then two years ago it bought restaurant chain Nolboo from an owner with a succession planning quandary and a desire to keep the solution out of the public domain.

Kim accumulated the different pieces of his tissue business over a 15-year period - Ssangyong C&B, for example, was previously owned by Procter & Gamble, while Monalisa Seoul came by way of court receivership and legal management.

Together these assets are Korea's largest tissue products manufacturer by production capacity and sales volume, and second-largest by revenue; Yuhan Kimberly takes top spot thanks to the higher average selling price for brands such as Kleenex. However, Yuhan-Kimberly's market share has been gradually falling, in part due to an increased focus on feminine pads and baby products.

Based on Ssangyong C&B-Monalisa's 2012 consolidated EBITDA of $35 million, MSPEA's entry valuation was around 6x, a substantial discount to Monalisa Seoul (10.5x) and comparable companies (12.4x).

The private equity firm restructured the group under a single holding company and brought in new senior management, including a CEO who formerly held senior positions with P&G Korea and LG Household & Healthcare's joint venture with Unicharm.

The next step will likely see the launch of new products, with the company eyeing higher margins in the premium segment as well as verticals that remain underpenetrated.

The Korean tissue market has seen compound annual growth of 9.5% over the past five years - or a 54% increase in market value - yet per capita tissue consumption is 9 kilograms, compared to 14 kg or higher in Japan and Taiwan.

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