E-Land may sell restaurant arm
MBK Partners first suggested the deal to E-Land and launched a due diligence last week, according to the sources who wished to remain anonymous. The process is expected to take around six weeks.
An E-Land spokesman confirmed that “discussions were in their initial stages” but gave no further details, saying it was too early to elaborate on the deal.
E-Land runs 18 restaurant chains including popular buffet brands Ashley and Jayeon Byeolgok. The company has 559 restaurants nationwide that are currently operated by subsidiary E-Land Park, which also oversees the group’s resort business. Last year, 700 billion won ($610 million), or 90 percent of E-Land Park’s sales, came from the restaurant business.
If successful, the deal could provide E-Land Group with much-needed capital to improve its financial status, a task promised by the group in a press conference last Monday. Sources say the deal could reach up to 1 trillion won in size and benefit both E-Land World and E-Land Retail, which each hold a 14.66 percent and 85.3 percent stake in E-Land Park.
The debt ratio of E-Land World, the group’s de facto holding company, currently stands at 240 percent, the result of financial difficulties after some of its retail brands, including New Balance, lost popularity among consumers.
Resolving its massive debt has been the company’s core management task since last year. This January, E-Land sold its youth apparel brand Teenie Weenie to Chinese fashion company V-Grass for 877 billion won. This helped bring the debt ratio down from 300 percent to its current level. E-Land Group wants to pull the figure below 200 percent this year.
Although E-Land’s restaurant business is lucrative, it faced controversy last year when a parliamentary investigation revealed E-Land Park had illegally withheld wages worth 8.4 billion won from its part-time staff. The public backlash halted a planned IPO by E-Land Retail, which many considered pivotal to improving the group’s financials.
During a press conference last Monday, the company presented its “Plan B” to privately sell shares of E-Land Retail and transfer E-Land Park’s ownership to E-Land World. The hope is that this will make E-Land Retail’s next IPO attempt smoother.
But if the deal with MBK goes well, it will unburden E-Land World from expending costs on reacquiring the restaurant business.
MBK Partners is Korea’s largest private equity firm with a portfolio that includes ING Life Korea and Universal Studios Japan. The firm has been mum on the deal, but sources in the industry say MBK Partners might be hoping to augment Homeplus, a discount chain it acquired from the English headquarters in 2015, with the restaurant acquisition.
Some discount chains in Korea run restaurants inside their stores as an additional source of revenue.
BY SONG KYOUNG-SON [email@example.com]