Controversy Over Franchisee Abuse Turns Consumers Away
Pizza Market Shrinks with Five Consecutive Years of Operating Losses
Intention to Acquire Letters Accepted Until the 24th, Followed by Final Bidding
Increased Interest from Franchises and Food Ingredient Companies
[Asia Economy Reporter Choi Sun-hye] MP Group, which operates the native franchise pizza brand Mr. Pizza, has been put up for sale in the M&A (mergers and acquisitions) market. It is the first time in 30 years since former chairman Jung Woo-hyun founded the company.
According to industry sources on the 17th, MP Group announced the sale of its management rights yesterday through the sale agent Samil PwC. The deal involves acquiring 48.92% (39,530,931 shares) of MP Group common stock (old shares) held by special related parties, including 16.78% stakes held by former chairman Jung and his son Jung Soon-min, and additionally injecting more than 20 billion KRW into the company through a third-party allotment of new shares.
Mr. Pizza, which started in 1990 near Ewha Womans University in Daehyeon-dong, Seoul, enjoyed peak popularity from the late 1990s. Hit products followed in succession, such as ‘Seafood Island’ featuring potato-wrapped shrimp as its trademark, and ‘Secret Garden’ topped with chicken breast and salad. In 2008, the company launched the Manopin franchise selling coffee and muffins together, and in 2009, it acquired the listed semiconductor company Memory & Testing and used a backdoor listing method by selling off the semiconductor division. It also ventured into overseas markets including China and the United States.
Chairman Jung Woo-hyun of MP Group, the founder of Mr. Pizza who caused a 'gapjil controversy,' is delivering a public apology at a press conference held on the afternoon of the 26th of last month at the company headquarters in Bangbae-dong, Seocho-gu, Seoul. (Photo by Yonhap News)
However, in the late 2010s, the company suffered setbacks amid controversies over franchisee bullying. Media reports revealed that cheese supplied to the pizza outlets was sold at inflated prices by a company operated by the former chairman’s family, effectively charging a ‘toll fee,’ which alienated many consumers. The situation worsened when former chairman Jung was arrested and indicted in July 2017 on charges of embezzlement and breach of trust amounting to 15 billion KRW. This incident triggered a substantive review of the company’s listing eligibility, halting stock trading for nearly three years.
The shrinking pizza market, influenced by the growth of the home meal replacement (HMR) market, also had an impact. Mr. Pizza had 262 franchise stores (387 including overseas, as of 2019), but has recorded operating losses for five consecutive years based on separate financial statements.
The Korea Exchange has twice resolved to delist MP Group, but the company repeatedly filed objections and was granted improvement periods. The last improvement period ended on February 10. Currently, the KOSDAQ Market Committee is reviewing whether the improvement plan has been implemented. The former chairman’s side chose to sell management rights as a last resort to improve the company’s financial situation and maintain its listing.
The seller plans to receive letters of intent (LOI) by the 24th to shortlist qualified bidders and hold the main bidding soon after. The desired price excluding the capital increase amount is reported to be several hundred billion KRW. The investment banking industry expects considerable interest from investors, seeing it as an opportunity to acquire the brand at a relatively low price. A Samil PwC official said, “There have been many inquiries from franchise companies and related food material suppliers.”
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
