South Korean PE firm JKL Partners successfully made a partial exit from the country’s denim maker TCE Corporation, with internal rate of return (IRR) of about 10 percent.
IS Holdings, the holding company of concrete-to-construction business group IS Dongseo, exercised a call option to buy a 40 percent stake in TCE for 45.1 billion won from JKL Partners, the largest shareholder of TCE, according to investment banking industry sources on April 22. The transaction was made based on the contract of joint investment between JKL Partners and IS Dongseo.
Following the call option deal, IS Dongseo has become the largest shareholder of TCE with more than 50 percent stake in the company. JKL Partners whose stake has decreased to 26.83 percent generated an IRR of about 10 percent from the deal.
JKL Partners and IS Dongseo (Ilshin Holdings) acquired a 76.83 percent stake in TCE for 63.1 billion won in 2016, with JKL Partners putting 53 billion won in the deal. Two parties agreed to the deal structure that IS Dongseo will exercise a call option to be the largest shareholder of TCE if JKL Partners’ investment period expires.
TCE has shown an increase in sales since then. TCE recorded sales of 51 billion won in 2016 on a consolidated basis, which almost doubled to 107.2 billion won in 2019. The company posted an operating profit of 1.3 billion won and net profit of 1.2 billion won last year.
IS Dongseo and JKL Partners plan to cash out their remaining stake in TCE by carrying out an initial public offering (IPO).
IS Dongseo has put efforts into business diversification. IS Dongseo, which recently split off its ceramics business, named it Inus and sold to E&F Private Equity, has expanded its business to construction waste management (Insun Environmental New Technology) and kids café (Bounce).
An IB industry source said that IS Dongseo’s exercise of the call option indicates that it will continue to diversify its business in the future.
TCE originated from the nation’s Tae Chang Enterprise founded in 1956. It started focusing on denim in 2007 and relocated its production facilities in Vietnam. Its clients include GAP, Uniqlo, Guess and CK Jean. (By reporter Choi Ik-hwan)