|This combination photo shows a consumer ordering a burger at a Burger King restaurant in Seoul, left, and a Mom’s Touch restaurant near Seoul City Hall. Newsis|
Korean units of McDonald’s, KFC also considered overvalued
By Park Jae Hyuk
Uncertainties are growing over sales of Korean units of McDonald’s, Burger King and KFC, as well as Mom’s Touch, as current owners struggle to find interested buyers, industry officials said Monday.
Since their current owners put the fast food franchises up for sale earlier this year, capital market insiders have viewed the companies as overvalued.
As investors remain reluctant to offer higher prices amid sharply rising interest rates and an economic slowdown, Affinity Equity Partners has reportedly recently decided to postpone the sale of its stakes in Burger King’s Korean and Japanese operations. until the second half of next year.
The Hong Kong-based private equity firm (PEF), which acquired Burger King’s Korean subsidiary in 2016 and its Japanese subsidiary the following year, has been trying since late last year to sell the two subsidiaries for a total of 1 trillion won ($759 million). , after hiring Goldman Sachs as an underwriter for the deal.
Although it was reported that the seller had shortlisted a few potential buyers ― including BHC Group, KKR and Elevation Equity Partners ― after a preliminary offer in March, M&A market insiders expressed skepticism about the acquisition potential of the hamburger chain by a PEF, stressing that it would be difficult to increase its valuation further until the sale.
KL & Partners also reportedly recently switched its underwriter for the sale of Mom’s Touch to Deutsche Securities from BofA Securities, to sell the chicken sandwich franchise for 1 trillion won. Korea’s PEF is confident the deal will be completed by the end of this year, but questions remain over the sale price.
“PEFs will continue to try to sell their fast food franchises at higher prices,” said a senior executive from another local PEF. “Given their revenue, however, most franchises seem overvalued.”
McDonald’s Korea, which is also on sale, is reportedly priced at 500 billion won. However, the American burger franchise’s Korean operation has suffered accumulated losses over the past three years.
Industry officials expect sellers to face increasing pressure to cut selling prices, once KG Group finishes selling KFC Korea to Orchestra Private Equity for 60 billion won in early next year. According to industry officials, the group initially sought to sell the fried chicken franchise for 100 billion won, but the national PEF convinced the seller to lower the price.
Suh Yong-gu, professor of marketing at Sookmyung Women’s University, pointed out that the entry of high-end hamburger brands into the Korean market will make it harder for McDonald’s and other fast food chains to attract potential buyers. .
Amid intensifying competition, Good Stuff Eatery exited the Korean market just five months after opening its first restaurant here. Shinsegae Food also plans to close all Johnny Rockets restaurants in Korea by the end of next year.