[PE Portfolio]⑧JKL Partners, Transforming the Corporate Constitution

Strength in Enhancing Corporate Value through Business and Workforce Structure Improvement
Successful Exit through Forward-Looking Investment Amid COVID-19 Pandemic
Selected as Private Equity Fund Manager by National Pension Service

JKL Partners (JKL) is a company founded in 2001 by CEOs Jeong Jang-geun, Kang Min-gyun, and Lee Eun-sang. All three CEOs are former accountants who initially focused on corporate restructuring before establishing and managing a PEF in 2004. Their main strategy involves acquiring mid-sized and small companies, improving their financial structures, creating new corporate value, and then selling them. They began attracting market attention after successfully closing a deal to acquire Pan Ocean, valued at around 1 trillion KRW, from the Harim Group.

Acquisition of Fire, the No.1 Touchless Automatic Car Wash Company... Business Model Gains Interest Overseas

The most recent portfolio addition is Fire, a car wash specialist company operating 'Come In Wash,' the leading touchless automatic car wash brand in Korea. Fire is currently focusing on expanding partnerships with gas stations and fuel stations. Kang Min-gyun, CEO of JKL, stated, "We are upgrading the existing car wash services at major stations and charging stations such as Hyundai Oilbank and E1 to Come In Wash's touchless automatic car wash service," adding, "As younger generations show increasing interest in premium cars, demand for touchless automatic car washes will grow." Fire's corporate value is estimated to be around 100 billion KRW. Fire gained popularity by being the first in the industry to introduce a car wash method that does not physically touch the vehicle. Within about four years since its brand launch, it has grown at an unprecedented pace, reaching approximately 200 branches nationwide. JKL took note of this. In August last year, Come In Wash Fire opened its first overseas branch in Manila, Philippines, a first in the industry. Recently, it signed business agreements with local companies to expand into the U.S., Europe, Japan, and Saudi Arabia. The investment banking (IB) industry expects JKL to grow Fire into a globally recognized company.

JKL specializes in buyout investments, focusing on acquiring mid-sized and small companies with growth potential, improving their financial structures, and providing new growth engines to facilitate exits (capital recovery). Earlier, during the COVID-19 pandemic slowdown, JKL acquired 100% of CleanTopia's shares in August 2021, anticipating further growth in the laundry franchise market due to the rise of single-person households and dual-income couples. As of the end of Q1 this year, CleanTopia is Korea's number one laundry franchise company with 133 branches and over 2,800 franchise stores. After acquisition, JKL maximized profitability through expanding franchise and customer networks, launching new services, and digital transformation. They expanded from primarily B2C (business-to-consumer) to B2B (business-to-business) by acquiring CleanWash, a hotel laundry specialist. They strengthened B2B sales targeting medical institutions and hotels for linen management services (including patient gowns, work uniforms, bed sheets, and blankets). Major general hospitals such as Severance Hospital, Samsung Seoul Hospital, and Seoul National University Hospital became clients. CleanTopia's sales steadily increased from 79.5 billion KRW in 2021 to 85.2 billion KRW in 2022, and 96.5 billion KRW in 2023. Operating profit also rose significantly from 4.2 billion KRW in 2021 to 11.4 billion KRW in 2022, and 12 billion KRW in 2023.

Noted for Successful Exits... The Secret Behind Being Selected as a National Pension Service Mandated Fund Manager

This year, JKL successfully completed its investment in T'way Air. They sold all shares of T'way Air to Daemyung Sono Group, recovering about twice the invested amount. Including a call option payment of 30 billion KRW, the total sale price was approximately 200 billion KRW. The internal rate of return (IRR) was about 23%, significantly exceeding the initial target of 20%. JKL actively participated in T'way Air's management. Previously focused on short-haul routes in Southeast Asia and Japan, T'way Air transformed into an airline capable of medium- and long-haul flights. With the introduction of large aircraft, it began flights to Singapore and Australia. In May this year, it started long-haul operations by launching flights to Zagreb, Croatia. Sales expanded from 214.4 billion KRW in 2021 to 525.8 billion KRW in 2022, and 1.3488 trillion KRW in 2023. The company returned to profitability last year. JKL anticipated a surge in travel demand post-endemic and timed its capital recovery accordingly, about three years after investing in T'way Air. JKL's successful exit attracted industry attention and recently led to its selection as a private equity fund manager for the National Pension Service.

Another portfolio prepared for exit this year, Lotte Non-Life Insurance, has shifted to continuous sale. Although a formal bidding process was conducted, JKL could not reach agreement on terms with multiple investors, so it plans to continue negotiations with domestic and foreign investors on an ongoing basis. JKL acquired 77.04% of Lotte Non-Life Insurance shares for 729.7 billion KRW in 2019. The desired sale price for Lotte Non-Life Insurance is reportedly between 2 trillion and 2.5 trillion KRW. As of the end of last year, Lotte Non-Life Insurance's net assets were 1.275 trillion KRW, and the insurance contract service margin (CSM) was 2.3966 trillion KRW, totaling 3.6536 trillion KRW. JKL is currently refinancing acquisition financing of 280 billion KRW maturing in October this year and has extended the usage period of the 'Lotte' brand with the Lotte Group. They are determined to sell at a fair price rather than rushing a sale. After acquiring Lotte Non-Life Insurance, JKL focused more on long-term protection insurance such as cancer insurance rather than short-term savings insurance to improve short-term profitability. As a result, the proportion of long-term protection insurance increased from 52.6% at the end of 2019 to 86.2% at the end of last year. The core profitability indicator, CSM, also increased by 42.9% in just six months. As of the end of September last year, Lotte Non-Life Insurance's new solvency ratio (K-ICS) was 208.4%, exceeding the regulatory recommended standard of 150%. CEO Kang explained, "In the case of Lotte Non-Life Insurance, corporate restructuring such as business and personnel structure improvements has been properly implemented, creating conditions for gradual capital recovery." Going forward, JKL is expected to pursue additional exits of quality investments while monitoring market conditions. GD-K Cosmetics and Donghae Machinery & Aviation are strong candidates. JKL is currently raising a blind fund of about 800 billion KRW, reportedly with major institutional investors such as the National Pension Service and the Korea Development Bank as contributors.