CJ ENM has conducted detailed due diligence on internet fashion store W Concept Korea with commerce arm CJ O Shopping as shortlisted bidders decide whether to contest the final round, which is expected in mid-February, industry sources said.

Four domestic and foreign firms have been shortlisted, including online shopping platform 11Street and retail giant Lotte Group, but there is speculation that some could pull out due to a valuation gap with the seller, IMM Private Equity (PE). 

All have conducted due diligence in a virtual data room under the supervision of Deal manager Citigroup Global Markets Korea Securities and made management presentations as they determine whether to participate in the final round of bidding.

CJ ENM is attracted to W Concept because fashion and cosmetics-related products accounted for a combined 40% of its product portfolio in the third quarter of 2020: clothing accounted for 20%, cosmetics 12.4%, and fashion accessories 7.6%. Online platform W Concept specializes in cosmetics, clothes and other fashion items, which could appeal to industry players seeking synergies with their businesses.

W Concept has strengthened its market profile as a premium online fashion platform by selling designer brand products, excluding some that are under its private brand lines such as FrontRow and Hersteller. Whether CJ ENM will remain in the race is likely to depend on how attractive it finds those designer brands.

However, the valuation gap between the seller and potential buyers may be an obstacle. IMM PE reportedly wants a gross merchandise value multiple of around 1.6 times for W Concept, while potential acquirers are said to consider a multiple of about 1 times as more appropriate. IMM PE took over W Concept at a multiple of 1.1 times.

“The deal will be struck if potential buyers offer valuations that the seller could accept,” said an industry source. “Offer prices are likely to be more important in the final round of bidding because strategic investors are most interested in the target.” (Reporting by Ar-rum Rho)