[Governance] Taepyeongyang Mulsan Delays Nadia Pacific IPO, FI Acquires Stake

[Asia Economy Reporter Jang Hyowon] As the listing of Nadia Pacific, a subsidiary of apparel company Taepyeongyang Moolsan, has been delayed, financial investors (FI) have begun to recover their investments.

Screenshot of the Nadia Pacific homepage.

According to the electronic disclosure by the Financial Supervisory Service on the 25th, Taepyeongyang Moolsan announced the day before that it will acquire 3.25 million shares (26%) of its subsidiary Nadia Pacific for 16.8 billion KRW. The transferor is Cape Quantum Jeil No.1 New Technology Business Investment Association, an existing investor. After the acquisition, Taepyeongyang Moolsan’s stake in Nadia Pacific will become 100%.

Previously, in July 2018, Cape Quantum Jeil No.1 Association invested 10 billion KRW in redeemable convertible preferred shares (RCPS) and 10 billion KRW in bonds with warrants (BW) in Nadia Pacific. Subsequently, in 2019, all RCPS were converted into common shares, and 3 billion KRW of the BW was exercised to acquire shares. The remaining 7 billion KRW was redeemed. In total, 3.25 million shares were acquired for 13 billion KRW.

At the time of the initial investment, Cape Quantum Association and Taepyeongyang Moolsan signed a put option agreement. If the initial public offering (IPO) does not proceed as planned, Taepyeongyang Moolsan will buy the Nadia Pacific shares held by Cape Quantum Association. Cape Quantum Association had made the investment as a pre-IPO, anticipating Nadia Pacific’s listing.

Nadia Pacific is an apparel original equipment manufacturer (OEM) established by Taepyeongyang Moolsan in 2012. The company has strengths in outdoor products, holding a Gore-Tex production license. It is evaluated to have quality competitiveness through collaboration with in-group specialized brands such as Frauden, which focuses on filling materials. Major production brands include outdoor and sports apparel brands such as Black Yak, Discovery, Nepa, Eider, Descente, and Fila.

At its establishment, Nadia Pacific’s sales were around 16.8 billion KRW, but thanks to the popularity of outdoor products, sales grew rapidly every year, reaching 117.7 billion KRW in 2019. Operating profit also showed a solid performance, recording around 7.5 billion KRW.

On this basis, Nadia Pacific selected Shinhan Investment Corp. as the lead underwriter in 2019 and pursued an IPO targeting this year. Earlier this year, the submission of the securities registration statement was even considered, making the listing appear imminent.

However, Nadia Pacific’s performance declined last year due to the impact of COVID-19, leading to a postponement of the listing. The market found it difficult to recognize an appropriate valuation. Last year, on a consolidated basis, Nadia Pacific’s sales were 86.5 billion KRW, down 26.5% from the previous year. Operating profit also plunged 46.7% to 4 billion KRW. As a result, Cape Quantum Association exercised the put option to recover its investment.

Taepyeongyang Moolsan stated, “As Nadia Pacific’s listing plan was postponed beyond this year, the pre-IPO investor exercised the put option, and we acquired the shares.”

Meanwhile, although Cape Quantum Association did not achieve the profits expected from the IPO, it gained about a 30% investment return over three years of investment.