Photo by Getty Images Bank
[Asia Economy Reporter Moon Hyewon] Following burger franchises KFC and Burger King, McDonald's Korea has also come up for sale, drawing industry attention to a significant shift in the domestic franchise market.
According to industry sources on the 14th, McDonald's headquarters in the U.S. recently appointed Mirae Asset Securities as an advisor and is seeking a partner to acquire McDonald's Korea business.
McDonald's Korea explained the sale initiative by stating, "We are looking for a strategic partner to grow the brand in Korea," and "We are reviewing options in cooperation with external professional institutions."
Previously, McDonald's headquarters attempted to sell McDonald's Korea in 2016, but the sale did not materialize, so the headquarters has been operating it directly since then.
Currently, McDonald's Korea is 100% owned by the U.S. headquarters. Last year, it achieved its highest sales since entering the Korean market, reaching 867.9 billion KRW, and when including franchise sales, annual sales surpassed 1 trillion KRW. However, McDonald's Korea has been struggling with operating losses every year. It recorded operating losses of 44 billion KRW in 2019, 48.3 billion KRW in 2020, and 27.7 billion KRW last year.
In the current domestic mergers and acquisitions (M&A) market, major global fast-food brands such as Burger King and KFC, in addition to McDonald's Korea, are also attracting potential buyers.
Affinity Equity Partners (hereafter Affinity), a private equity fund (PEF) operator, decided at the end of last year to sell Burger King's Korean and Japanese business rights and appointed Goldman Sachs as an advisor. Affinity acquired 100% of Burger King Korea's shares in 2016 for 210 billion KRW.
KG Group, which owns KFC, also selected Samjong KPMG as the seller's advisor earlier this year and is pushing forward with the sale. KG Group acquired 100% of SRS Korea, the Korean subsidiary of KFC, from the global private equity fund City Venture Capital Partners (CVC) in early 2017 for about 50 billion KRW. The expected sale price is known to be around 100 billion KRW.
Mom's Touch, which voluntarily delisted in March, is also expected to come up for sale in the second half of this year. Some analysts suggest that the largest shareholder of Mom's Touch, private equity fund KL Partners, decided to delist to minimize potential noise during the resale process.
The reason major burger franchise companies are putting themselves up for sale is that the industry views the second half of this year as an optimal time to receive a high valuation. With the lifting of social distancing and the full-scale recovery of daily life, there is an expectation of performance improvement starting in the second half of this year.
However, skepticism has been raised that finding new owners may not be easy as well-known overseas brands are entering the domestic burger market one after another, intensifying competition. This is interpreted as their competitiveness declining and sales uncertainty increasing in a market that has already rapidly grown to a scale of 4 trillion KRW and reached saturation.
An industry insider said, "Due to the endemic impact, companies see the second half of this year as an appropriate time for sales," adding, "Depending on the M&A results, the landscape of the domestic burger market will change significantly."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
