A consortium of SKS Private Equity and Daishin Private Equity is seeking to buy Ohjin Corporation. The South Korean private equity consortium is said to have completed due diligence on the restaurant kitchen equipment supplier, while whether this will lead to an actual acquisition is still unclear.
LB Private Equity, the PE unit of NH Investment & Securities (NH PE) and H&CK Partners, which together own 100 percent of Ohjin Corporation, have contacted potential buyers since last year, looking for exit opportunities in about four years since their first investment in the company, sources close to the matter said on April 16.
Several investors reportedly expressed interest in the company. Among them, strategic investors seemingly pulled out of talks with its private equity owners as they couldn’t agree on the company’s valuation. And recently, one of the financial investors, a consortium of SKS PE and Daishin PE, reportedly completed due diligence on the company. The two PE firms jointly manage a 200 billion won secondary fund, Daishin-SKS Secondary PEF, that was closed in July 2016.
However, the talks have been put on hold for the time being as private equity investors are increasingly being cautious about new investments with the coronavirus pandemic taking a toll on the financial markets, the sources said. It is unclear when the talks could restart.
Existing private equity owners are likely to focus on selling the company at a right price, rather than pushing to speed up a sale, because they already have an almost complete payback of their invested capital. Ohjin Corporation annually paid a large amount of dividend to its private equity owners, including a 2.8 billion won cash dividend last year.
Ohjin Corporation is growing at a relatively moderate pace, but is attractive in that it generates stable cash flows. It is also in a strong financial position, maintaining zero borrowings on its balance sheet since its foundation. In 2019, the company recorded revenue of 21.9 billion won and operating income of 4.2 billion won, respectively, similar to those recorded in the previous year.
Ohjin Corporation signed an agreement in the second half of last year to become the exclusive distributor of Italian coffee machine brand Victoria Arduino in South Korea. The company is expecting this to have a positive effect on its revenue from this year, which could make its private equity owners reconsider the timing of a sale.
Founded in 1978, Ohjin Corporation supplies and maintains kitchen equipment – such as coffee machines, ovens and ice makers – for major coffee chains including Starbucks, Ediya and Hollys. The company’s customers also include restaurant chains like Pizza Hut and McDonalds as well as Hanwha Hotels & Resorts and CJ Foodville.
Ohjin Corporation had about 9.8 billion won in cash and cash equivalents at the end of 2019 and its EBITDA was 4.4 billion won. Given this information, the company’s valuation is expected to be between 45 billion won and 50 billion won.
(By reporter Kim Hye-ran)