Update - MSPEA buys restaurant manager Nolboo

The private equity firm last week reportedly purchased a 70% stake in Korean restaurant chain Nolboo for approximately $110 million. The target company has 700 outlets across eight franchise chains in markets including South Korea, China, Singapore and Thailand. The stake was purchased from CEO Kim Soon-jin, who formerly held 90.4% of Nolboo.

MSPEA is said to be keen to show LPs that its new Korea team can close deals ahead of an anticipated fundraise for a regional vehicle next year, and Nolboo has been called a safe play for the firm in this context.

In April 2010, four of MSPEA's six Korea team members departed to launch Hanh & Co., led by former CIO and Managing Director Scott Hahn. The departures slowed investment momentum, but MSPEA rebuilt to a team of about seven, "who are all a little bit younger, a bit more junior and have a bit less private equity background," but hold promise, says one source with knowledge of the firm's operations.

Bringing the team up to speed amid an impending fundraise has created a level of "external and internal pressure to get something done," the source adds, which was a key driver in closing the Nolboo deal.

Nolboo is an icon in its own right, having been in business for 20 years and provides Korean staples to both domestic and overseas consumers. Its specs look positive for a private equity owner. Yet, there is a sense of over-eagerness in MSPEA's transaction. Domestic media, citing sources from the sell-side of the deal, reported that the private equity firm paid a whopping 14x EBITDA for the asset.

"Funds were saying that OB Beer, which is the largest beer company in the country, was expensive at 11-12x EBIDTA," a private equity source tells AVCJ. "Paying this sort of premium in a market where you can still find good deals doesn't necessarily make sense."

However, sources familiar with the transaction claim the reported valuation is exaggerated. MSPEA's entry value is 7.5x Nolboo's projected EBITDA for the current fiscal year.

Casaul dining targets have been popular among private equity investors in Asia this year, with companies such as Golden Jaguar and Origus in China and Skylark in Japan being scooped up in recent months. But individual markets present their own challenges and some industry participants are wary about the sector's prospects in Korea, citing difficulties gaining market share abroad and high asset prices.

"Restaurants in Korea are something that you run if you're a private owner or a caterer, but Morgan Stanley sees it different," says one source. "To be fair, Morgan Stanley's business has traditionally been very, very good in Korea. It could end up doing something interesting with this investment."

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• Topics
• North Asia
• Consumer
• South Korea
• Morgan Stanley Private Equity Asia
• Consumer