Hong Kong-based investment firm PAG has exited Young Toys, the South Korean toy maker known for its Tobots transforming robots and Beyblade Burst tops, about five years after it bought the company from Headland Capital Partners in 2015.
A consortium led by education service provider MiraeN completed the acquisition of the toy maker from PAG for 148 billion won ($126 million) on September 10, industry sources said.
Young Toys’ Beyblade Burst toy line, which was launched in 2016, became a big hit in the domestic toy market. The company had 190 billion won in revenue and an operating income of 52.3 billion won in 2018, up nearly threefold and eightfold respectively compared to 2015.
Based on the company’s strong financial performance, PAG started searching for a buyer that year with BDA Partners as deal manager. It reportedly wanted the 400 billion won to 500 billion won for Young Toys at the time.
However, earnings were hit hard in the following year by the rise of rivals, especially ChoiRock Contents Factory known for its character toys such as Hello Carbot and Turning Mecard. Young Toys’ revenue fell 32% year-on-year to 129.5 billion won in 2019.
A decline in earnings brought down the price tag of the company to about 200 billion won, which attracted interest from MiraeN. It teamed up with two investment firms, Nvestor and Corstone Asia, to bid for Young Toy and was named as the preferred buyer for the toy maker in October last year.
The deal was eventually signed in August. Negotiations took longer than expected because of a partial shutdown of Young Toys’ manufacturing facilities in China and increased economic uncertainty in the wake of the Covid-19 pandemic.
MiraeN reportedly expressed a strong interest in Young Toys to use it as a springboard for its expansion to the market for toy content. Young Toys recorded better-than-expected earnings in the first half of this year on the back of increased demand from parents buying more toys for their kids, who were spending longer at home.
The final transaction value of 148 billion won was less than the 220 billion won that PAG paid for the company in 2015. However, PAG also received some 67 billion won in dividends from Young Toys for three years from 2016 to 2018.
“Other investments by PAG’s fund that invested in Young Toys are said to have generated high returns overall,” an industry insider said. “Because Young Toys is one of the last portfolio companies of the fund, PAG seems to have prioritized exiting the company on schedule.” (Reporting by Se-hun Jo)