[PE Portfolio]③ IMM PE Invests in Cloud and Robot New Industries After Passing the 'Bulhwang Tunnel'

Blind Fund Rose Gold No. 5 Targets 2.6 Trillion KRW for Mega Fund Formation
IMM PE Portfolio Includes 17 Companies... Managing Assets Worth 8.5 Trillion KRW

Editor's NoteThis year marks the 20th anniversary of the introduction of the private equity fund (PEF) system in South Korea, and the role of the domestic PEF industry is growing. PEFs acquire management rights of undervalued companies, increase their value, and then sell them in the mergers and acquisitions (M&A) market to generate profits. They also accept companies that have high future value but deteriorated financial soundness when such companies come onto the market, and sometimes attempt hostile M&As on companies with weakened governance structures, such as those with controlling shareholder risks. As the history of the PEF industry has accumulated, the number of portfolio companies and employees held by Korea’s mega PEFs have far surpassed those of many large corporate groups. Beyond playing the role of a catalyst to prevent stagnation in the corporate ecosystem, the performance of PEF-owned companies now significantly influences the future of our industry. Asia Economy analyzes the performance and results of portfolio companies held by leading domestic PEFs.

Established in 2006, IMM Private Equity (IMM PE) is a leading domestic private equity fund alongside MBK Partners and Hahn & Company. IMM PE began investing in earnest by raising its first blind fund (a fund that does not pre-select investment targets) called 'Rose Gold 1' worth 312.5 billion KRW in 2008, funded by the National Pension Service, Korea Post, and the Military Mutual Aid Association, among others. The scale has since grown significantly, with the current 'Rose Gold 5' fund targeting 2.6 trillion KRW. IMM PE currently has 17 companies in its investment portfolio, totaling 41 companies cumulatively. As of 2024, it manages assets worth 7.4 trillion KRW. The combined sales of its invested companies amount to 92 trillion KRW, and the total number of employees in these companies reaches 80,000.

Hanssem and Missha Turn Profitable, Emerging from the Recession Tunnel

Kim Yoo-jin, Vice President of IMM PE and appointed CEO of Hanssem last year, boldly cut costs in areas such as TV advertising and home shopping where the return on investment was not significant. She reduced inefficient habitual expenditures and redirected funds toward productive areas like purchasing and logistics efficiency. As a result, Hanssem achieved a turnaround with consolidated sales of 502 billion KRW and operating profit of 11.5 billion KRW at the end of last year. Hanssem plans to demonstrate a full-scale turnaround this year through profitability-focused business strategies and strengthening core business competitiveness.

Able C&C, which operates the cosmetics brand Missha, resolved its end of default (EOD) status by the end of last year and entered a stabilization phase. IMM PE secured management rights of Able C&C by investing over 400 billion KRW since 2017, utilizing acquisition financing worth 120 billion KRW in the process. Able C&C recorded consolidated sales of 273.6 billion KRW last year, a 10.4% increase from the previous year. Operating profit also rose 14.2% year-on-year to 11.4 billion KRW. European sales grew by 48% compared to the previous year, while the U.S. and Japan subsidiaries grew by 12% and 8%, respectively. Hiring Hollywood actress Elizabeth Olsen as a global ambassador effectively raised brand awareness overseas. Able C&C currently operates in 38 countries, with approximately 55% of total sales generated overseas, laying the foundation for a new leap forward.

Smooth Progress in New Industry Investments... Strong Growth Sparks 'Jackpot' Expectations

The growth of Megazone Cloud, Korea’s leading cloud management service company invested in two years ago, is showing positive momentum. According to Megazone Cloud’s most recent 2022 audited report, consolidated sales reached 1.266 trillion KRW, a 68% increase from the previous year. This sales growth rate is three times the 23% domestic market growth forecast by global market research firm Gartner. Compared to 2019, sales have increased approximately 500%. The key challenge ahead is turning profitable. In 2022, during its Series C funding round, Megazone Cloud was valued at 2.4 trillion KRW and raised a total of 580 billion KRW in investments. IMM PE invested 200 billion KRW through its blind fund Rose Gold 4 and holds an 8.46% stake, second only to the largest shareholder Megazone (53.16%). If Megazone Cloud continues its rapid growth and succeeds in an initial public offering (IPO), IMM PE is expected to realize significant profits from its stake.

Another new growth company invested in by IMM PE is Bear Robotics. Founded in 2017, Bear Robotics is an AI-based autonomous service robot startup developing and selling serving robots for restaurants, headquartered in Redwood City, Silicon Valley. Its flagship products, Servi and Servi Plus, are used by Paris Croissant, Abiko, and Mongjungheon, among others. Recently, LG Electronics became the largest single shareholder by participating solely in Bear Robotics’ Series C funding. IMM PE, which made a preemptive investment two years ago, is increasingly hopeful for a jackpot. IMM PE led the Series B funding in 2022, investing 60 billion KRW. At that time, Bear Robotics was valued at 500 billion KRW. Bear Robotics was valued at 100 billion KRW during its Series A funding in 2020, and it is understood that the company was valued at a minimum of 700 billion KRW in the recent Series C funding.

IMM PE’s Biggest Issue This Year: Sale of Jenuone Science Valued Around 1 Trillion KRW

Above all, IMM PE’s main focus this year is the sale of Jenuone Science, a contract development and manufacturing organization (CDMO) company valued at around 1 trillion KRW. Jenuone Science originated from Kolmar Korea’s pharmaceutical division and has led the domestic synthetic drug CDMO industry since 2002. About 80% of the approximately 300 pharmaceutical companies in Korea are Jenuone Science’s clients. IMM PE established Jenuone Science after acquiring Kolmar Korea’s pharmaceutical division and its subsidiary Kolmar Pharma in 2020 and currently holds 100% equity. The total investment amount is 512.4 billion KRW, of which about 200 billion KRW was raised through acquisition financing. The sale process is currently underway, with fierce competition among major domestic and international funds such as BlackRock, Brookfield, and Macquarie Asset Management. The high growth potential and cash-generating ability underpin the strong interest in the sale. Unlike new drug development, CDMO can generate stable profits without large-scale development costs, making it an attractive acquisition target for financial investors who need to recover their investments within a certain period. Citi Global Markets Securities, the sale’s lead advisor, plans to review final bids and select the buyer by next month.

The most recent company added to IMM PE’s portfolio is United Terminal Korea (UTK), a tank terminal operator. Earlier this year, IMM PE acquired UTK from Macquarie Asset Management for about 300 billion KRW. UTK operates liquid storage facilities for petroleum and petrochemical products located at Ulsan Port. It is regarded as a high-quality company capable of generating stable profits, recording sales of 43.3 billion KRW, operating profit of 13.9 billion KRW, and earnings before interest, taxes, and amortization (EBITA) of 24.2 billion KRW in 2022. The acquisition was financed using the Rose Gold 5 fund, and IMM PE is expected to continue executing a bolt-on strategy by investing in facility upgrades and acquiring similar companies after this purchase.