Numerous financial investors have joined the race for beauty chain CJ Olive Young’s pre-initial public offering (IPO), thanks to its position in the domestic health and beauty chain industry.

Joint deal managers Credit Suisse and Shinhan Investment recently held the first round of bidding for the beauty chain, in which total 14 potential buyers participated, industry sources said on October 22. Texas Pacific Group (TPG), Hahn & Company, Glenwood Private Equity, IMM Private Equity and JKL Partners are among financial investors that have participated in the first round of bidding. Most of the contenders are reportedly reviewing the deal seriously.

Owner CJ Group, the South Korean food and entertainment conglomerate, is selling a minority stake in CJ Olive Young, including a 17.97% shareholding held by Lee Sun-ho, the only son and heir apparent of group chairman Lee Jae-hyun, and a 10% stake owned by the chairman’s younger brother Lee Jae-hwan.

Market insiders are looking into the reasons why the deal has attracted such strong interest from many global private equity firms and buyout funds. This is because the owner has put only a minority stake in the company up for sale and the valuation is likely to be mere 300 billion won ($266 million).

While private equity firms have strong interest in domestic health and beauty companies, CJ Olive Young has a strong presence in the health and beauty chain market, with market share of over 70% and more than 1000 stores nationwide.

CJ Olive Young also has great growth potential in online sales, as it still depends highly on offline stores.

“There have been some cases recently that large-sized funds generated handsome returns by investing in a minority stake,” said an industry source. “A rising number of funds start to think they could purchase a minority stake in a company and exit through an initial public offering at a higher price later.”

The seller plans to select a shortlist of bidders soon. It needs to be seen, however, whether financial investors’ strong interest in the pre-IPO will continue because the owner will seek to secure as much proceeds as possible through the deal to purchase shares of CJ Corp to accelerate the succession process, industry sources said. (Reporting by Hye-ran Kim)

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