Selected Sale Lead Manager and Sent Investment Prospectus
Following Twosome Place, Selling Valuable Tous Les Jours
Focusing on 'Food' for Growth by Securing Cash
[Asia Economy Reporter Lee Seon-ae] Tous Les Jours has finally been put up for sale in the merger and acquisition (M&A) market. CJ Group, which had continuously denied the sale, reversed its denial exactly three months after issuing a denial disclosure. CJ Group has devised a strategy to focus on the 'food' sector, which is on a growth trajectory, rather than the struggling 'dining out' sector, and to concentrate efforts on Chairman Lee Jae-hyun's vision of 'globalizing Korean cuisine.'
According to the investment banking (IB) industry on the 14th, CJ Group recently selected Deloitte Anjin as the lead manager for the sale of Tous Les Jours and sent teaser letters (investment information documents) to domestic and foreign private equity funds (PEFs).
Tous Les Jours is a core business unit of CJ Foodville, CJ Group's dining out affiliate, and the second-largest franchise bakery company in South Korea. It has about 1,300 domestic franchise stores with a market share of 25.8%. It accounts for about 50% (around 450 billion KRW) of CJ Foodville's sales, making it a valuable asset. Previously, the coffee business unit Twosome Place, considered a more attractive cash cow than Tous Les Jours, sold its shares to the Hong Kong-based PEF Anchor Equity Partners last year and transferred all remaining shares this year.
Although CJ Foodville's operating loss significantly decreased after selling Twosome Place, the recent deep recession caused by the spread of the novel coronavirus (COVID-19) appears to have prompted the company to start selling the valuable asset Tous Les Jours to secure additional cash. CJ Foodville's sales last year were 890.3 billion KRW, down 15% from the previous year, and it recorded an operating loss of 3.9 billion KRW, continuing its operating deficit. This marks the fourth consecutive year of losses since 2015.
Earlier, in May, CJ Group also conducted a sale process for Tous Les Jours, sparking rumors of a sale. At that time, CJ Group denied the rumors through a disclosure, stating, "CJ Foodville is not considering selling its stake in Tous Les Jours." If a denial disclosure is reversed within three months, the company is designated as an unfaithful disclosure corporation and penalized, but CJ Group ultimately acknowledged the sale three months after the denial disclosure.
Tous Les Jours New Concept Store
The market believes that CJ Group initially wanted to sell CJ Foodville as a whole, but considering its large size and the ongoing recession in the dining out business, it judged that this was unlikely and thus put only Tous Les Jours up for sale. A CJ Group official said, "We are reviewing various options, including the sale of Tous Les Jours' shares."
CJ Group plans to secure cash through the sale of Tous Les Jours and use it as investment funds to realize the vision of globalizing Korean cuisine. CJ CheilJedang, which focuses on the food business within CJ Group, posted its highest-ever operating profit in the first half of this year, playing a solid leading role in the group.
CJ Group has a strong intention to invest only in 'food' going forward. To this end, CJ Group has completed the process of transferring all shares of the 'Bibigo brand trademark rights,' jointly held by CJ Foodville and CJ CheilJedang, to CJ CheilJedang. This is part of the effort to grow Bibigo into an integrated brand covering both dining out and home meals, thereby achieving the globalization of Korean cuisine.
CJ Foodville is implementing a high-intensity self-rescue plan, including selling owned real estate and freezing new investments. It is safe to say that no further business expansion will take place. If the sale of Tous Les Jours succeeds, CJ Foodville will shrink as a dining out affiliate and is expected to maintain only a nominal presence by operating brands such as VIPS, Season's Table, and Jeil Jemyunso. The investment banking industry expects CJ Group to continue considering the sale of its dining out business as it has suffered losses and equity method losses for several years.
Meanwhile, opinions are divided in the industry on whether the sale of Tous Les Jours will proceed smoothly. CJ and the Tous Les Jours brand have high recognition and steady sales, making it an attractive asset. However, the saturated bakery market and difficulty in further growth are burdens. A PEF official hinted, "Ultimately, an attractive price will determine whether the deal is concluded," adding, "If CJ adjusts its price expectations, the sale will be successful."
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