Coffee Bean Korea, the master franchisee in South Korea for Californian-based chain The Coffee Bean & Tea Leaf, will face renewed questions over its price and limited overseas expansion prospects as it makes another attempt to find a buyer.
The company recently approached potential investors, including local food and beverage conglomerates and private equity firms, about the sale of a 100% stake, industry sources said on Friday (October 16). It comes after Coffee Bean Korea tapped several private equity investors last year to sell the stake but they failed to reach an agreement on the price.
Launched in Seoul in 2001, the chain had 278 stores nationwide at the end of June, with average annual revenue growth of 4.4% until 2018. The company recorded revenue of 165 billion won ($144 million) and earnings before interest, tax, depreciation and amortization (EBITDA) of 12.3 billion won in 2019.
Buyers are being offered the entire shareholding of president Park Sang-bae and several related parties, although a smaller stake could be sold depending on negotiations with potential buyers. The firm wants to find a buyer through a private sale rather than a public auction, and is reportedly targeting a 150 billion won valuation, or about 12 times EBITDA in 2019.
Coffee Bean Korea could attract interest from investors looking to grow in the food and beverage industry, as it controls a top-tier market share. All of its stores are directly operated, and a large portion of the customer base comprises younger people loyal to the coffee chain.
However, a new owner would not be able to expand into overseas markets because of country-wise master franchise rights. The company also appears to have prioritized a bigger size rather than profitability, which indicates a need for restructuring.
“Its franchise rights are restricted to the country and the expensive price may make the company less attractive to potential buyers,” an industry insider said. “Investors’ interest in offline businesses has also declined due to the Covid-19 pandemic.” (Reporting by Ik-hwan Choi)