Banks jockeying for lead role in CJ Olive Young IPO Banks pitching for IPO roles are divided over valuation of CJ’s beauty chain

Translated by Ryu Ho-joung 공개 2021-11-12 08:07:27

이 기사는 2021년 11월 12일 08:06 더벨 유료페이지에 표출된 기사입니다.

CJ Olive Young, the cosmetics chain of South Korea’s conglomerate CJ Group, has started a process to select underwriters for a potential initial public offering, with many investment banks in the race to win a plum role in the lucrative deal.

Local securities firms and foreign banks pitched the company for roles on the IPO on Monday and Tuesday respectively, industry sources said. CJ Olive Young is expected to make final selections as early as next week, with a target of listing in the second half of 2022.

All of the top five local securities firms – KB Securities, NH Investment & Securities, Samsung Securities, Mirae Asset Securities and Korea Investment & Securities – pitched to be advisers for the potential listing. Among foreign banks in the race are Credit Suisse and Citigroup Global Markets Securities.

CJ Olive Young, which was spun off as a separate entity from CJ OliveNetworks in 2019, generated a 100.1 billion won ($84.7 million) operating profit on revenue of 873.8 billion won in 2020. CJ Corp, CJ Group’s holding company, owned the largest stake in the company of 55.24% as of the end of June this year.

CJ Olive Young has grown to become a dominant player in the domestic beauty retail market, expanding its number of stores from 800 in 2016 to 1,259 in 2020 nationwide.

In contrast, rival Lalavla saw its stores reduced from 186 in 2017 to 86 at the end of September this year. LOHBs’ total number of stores also decreased from 131 in 2019 to 67 at the end of September this year. Shinsegae’s Chicor and the French beauty chain Sephora only have 30 and six stores, respectively, across the country.

The listing of CJ Olive Young is anticipated to be one of the biggest IPOs in South Korea next year. However, banks pitching for a role on the listing are said to have been divided over what they believe to be a proper valuation of the company, with their valuation estimates ranging from 2 trillion won to 3 trillion won.

Some observers say it would not be easy to lead the listing successfully because there are several variables to consider, such as the exit of a financial investor and the family-run conglomerate’s succession planning.

CJ Olive Young last year raised 414.1 billion won from Glenwood Private Equity in a deal that gave the Seoul-based private equity firm a 22.56% stake in the company at a 1.84 trillion won valuation. This means the potential offering needs to value the beauty chain at 2 trillion won or higher in order to make the private equity firm’s investment profitable.

Additionally, the higher the company’s valuation is set, the more smoothly the conglomerate’s succession plan will work. It is likely that Lee Sun-ho, the eldest son of CJ Group chairman Lee Jay-hyun and one of the beauty chain’s major shareholders, will use the IPO to build up financial resources to strengthen his control of the conglomerate.

“The competition will be fierce among banks to win the lead advisory role for CJ Olive Young’s IPO,” said an industry insider. “The deal could be potentially lucrative but there are also several factors to consider, which could complicate the listing.” (Reporting by Joon-woo Nam)
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