MGC Global, an affiliate of KOSDAQ-listed Borah TL (250000.KQ), is pursuing an acquisition of Haitai htb, a subsidiary of LG Household & Health Care (051900.KS).
MGC Global recently joined the preliminary bidding for Haitai htb, according to investment banking sources on the 10th. Samjong KPMG is managing the sale, with the price discussed in the market at around 300 billion won ($216 million). Several financial investors are also said to have submitted preliminary bids alongside MGC Global.
MGC Global operates Mega MGC Coffee, a low-cost coffee franchise. The company is wholly owned by Wooyoon, in which Borah TL Chairman Kim Dae-young is the largest shareholder. In 2021, Kim partnered with private equity firm Premier Partners to acquire Mega Coffee, and Wooyoon later secured a 100% stake after Premier exited its investment. When Haitai htb came to market as a potential target last year, MGC Global also weighed a purchase, but the deal fell through after LG Household & Health Care halted the sale midway.
MGC Global is expected to lean on its cash resources. Wooyoon, MGC Global's largest shareholder, held 195.1 billion won in cash and cash equivalents on a consolidated basis at the end of last year. It posted revenue of 652.4 billion won and earnings before interest, taxes, depreciation and amortization (EBITDA) of 126.4 billion won, with most of its sales and profit analyzed to come from MGC Global. Investment banking sources cite its ample cash holdings and strong cash-generating ability as strengths.
Being the operator of Mega Coffee is a factor that could create synergy with Haitai htb. By using Haitai htb's beverage production facilities and distribution network, MGC Global could make ready-to-drink products under the Mega Coffee brand and expand sales channels to convenience stores and supermarkets. It is a common strategy for cafe franchises to release their own brands as cup coffee or bottled drinks to broaden distribution.
Haitai htb produces beverages such as Galamandeun Bae (blended pear juice), Podo Bongbong and Coco Palm. LG Household & Health Care acquired a 100% stake in the former Haitai Beverage in 2011 and renamed it Haitai htb in 2016. The company's performance has been shaky recently amid a slowdown in domestic consumption and cost pressures. It recorded revenue of 374.1 billion won last year but swung to a loss, with an operating loss of 10.2 billion won and a net loss of 24 billion won.
The sale is seen as part of LG Household & Health Care's move to clean up non-core businesses and strengthen the competitiveness of its core beauty division. Coca-Cola Beverage, regarded as a cash cow, was excluded from this sale. Observers expect LG Household & Health Care to channel the proceeds from the subsidiary sale into its main businesses such as cosmetics.
