Able C&C, a local cosmetics company
‘THAAD Situation’ after the acquisition of IMM PE
Deciding to sell and accept the loss of principal
A local cosmetics brand Missha (company name: Able CNC) has been put up for sale. IMM Private Equity (IMM PE), a private equity fund (PEF) manager, has offered a stake in the management of the company.
According to the investment banking (IB) industry on the 15th, IMM PE appointed Credit Suisse as the lead manager and started the process of selling Able CNC. The target of the sale is a 59.2% stake in Able CNC owned by IMM PE. The estimated sale price of this stake is about 200 billion won. The company’s market capitalization is 156.5 billion won as of the closing price of the day.
The reason IMM PE acquired Able CNC in 2017 was because it expected price competitiveness centered on mid- to low-priced products to continue. The fact that the brand awareness has been built up through Missha Day, etc. was also positive. Following this, the company acquired a 25.5% stake in former chairman Seo Young-pil, the founder, for 188.2 billion won, and invested a total of 400 billion won through a tender offer and capital increase to secure the current stake.
However, as bad news overlapped from the time of the acquisition, Able CNC became a ‘sick finger’ to IMM PE. Immediately after the takeover, Chinese tourists were cut off from entry in the aftermath of China’s retaliation against THAAD. Operating profit from 11.2 billion won in 2017 fell to 1.8 billion won in 2019. Last year, it recorded a loss of 22.3 billion won due to the aftermath of COVID-19. As consumers’ preference for high-priced products intensified and online purchases became commonplace, Able CNC’s slump, which was mainly focused on mid- and low-priced offline products, prolonged.
IMM PE finally started restructuring in June of last year to shift its business structure to an online focus. The number of stores, which approached 700 at the time of the acquisition, decreased to 327 last year. The profit structure also diversified from offline to online and overseas. The proportion of offline sales decreased from 63% in 2019 to 38% this year. During the same period, overseas sales increased from 25% to 39%, and online sales increased from 13% to 23%. Earnings improved as a result of restructuring. Following a successful turnaround in the first quarter of this year, the company recorded an operating profit of 2.4 billion won in the second quarter. Annual profit before amortization (EBITDA) is also expected to recover to W20bn this year.
Mid-sized companies that want to enter the cosmetics market and domestic and foreign cosmetics companies that want to strengthen their mid- to low-priced product lineup are major candidates for acquisition. Companies that have started producing their own brands (PB) in the cosmetic field, such as Musinsa, are also mentioned as candidates.
By Cha Jun-ho, staff reporter chacha@hankyung.com