Baek Jong-won Bowing His Head... Will the 200 Billion Won Ammunition Accelerate M&A? [Why&Next]

The Bowed 'Godfather of the Restaurant Industry'
The 'Baek Jong-won Brand' as a Box Office Guarantee... Risk Boomerang
The Born Korea's 260 Billion KRW War Chest... Will Baek Jong-won Overcome Risks Through M&A?

Baek Jong-won, CEO of The Born Korea, has finally bowed his head. Known as the 'godfather of the restaurant industry,' The Born Korea, led by CEO Baek, made a spectacular debut on the domestic stock market last year. However, the company's value plummeted amid various controversies, including the price dispute over 'Baek Ham.' Recently, after the company was criminally charged for falsely labeling imported ingredients as domestic, CEO Baek issued an official apology.

In a recent apology posted on The Born Korea's website, CEO Baek stated, "I feel a deep sense of responsibility and sincerely apologize for causing concern to many people due to various issues related to The Born Korea," adding, "I am especially reflecting deeply on the unacceptable mistakes that occurred during the production and distribution processes."

Baek Jong-won, CEO of The Born Korea. Photo by Kang Jin-hyung

The Bowed 'Godfather of the Restaurant Industry'

The Born Korea was founded by CEO Baek Jong-won, who started an interior design company, Dain Industrial, in 1994, and entered the food service industry in 1998 by launching the indoor pub brand 'Hanshin Pocha.' The company later expanded into franchise businesses such as Saemaeul Sikdang, Baekdabang, and Hong Kong Banjeom, and grew into a small and medium-sized enterprise operating home meal replacement (HMR) distribution and Hotel The Born Jeju. Last year, the company recorded sales of 464.1 billion KRW and an operating profit of 36 billion KRW. Currently, the shares held by co-CEOs Baek Jong-won and Kang Seok-won are 59.14% and 13.97%, respectively, with Baek's friendly shares totaling 75.43%.

The rapid growth of The Born Korea was driven by its founder, CEO Baek Jong-won. CEO Baek gained fame as the 'godfather of the restaurant industry that coexists' by appearing on various entertainment shows, including 'Baek Jong-won's Alley Restaurant,' sharing cooking recipes and know-how on running small businesses. This reputation became the driving force behind the success of The Born Korea's franchise business as well as the HMR distribution under Baek's name.

However, the 'coexistence image' that CEO Baek had built became a spark for recent controversies. Ahead of this year's Lunar New Year, The Born Korea faced criticism for pricing the 'Baek Ham Gift Set' higher than the industry's top product. Critics pointed out that despite the higher price for the same volume, the pork content was lower in The Born Korea's product. Although The Born Korea stopped selling the product on its online mall, the controversy continued. Additionally, Yeondon Bolkatsu, a franchise under The Born Korea, faced criticism for its fruit beer 'Gamgyul Oreum' due to insufficient tangerine content.

Moreover, while CEO Baek emphasized the use of domestic ingredients on broadcasts, claiming to "revive farms," it was revealed that Brazilian chicken was used in The Born meal kits. Allegations of violating origin labeling laws continued to surface. It was found that Chinese garlic was used in the Hanshin Pocha stir-fried octopus, which was promoted as using domestic ingredients, and Baek Jong-won's Baekseok Doenjang used Chinese improved meju soybean paste. Notably, the Baekseok Doenjang production plant is designated as an agricultural promotion zone, where the use of imported raw materials is fundamentally prohibited. The Seoul office of the Agricultural Products Quality Management Service's special judicial police recently criminally charged CEO Baek for violating origin labeling laws and launched an investigation.

The 'Baek Jong-won Brand' as a Box Office Guarantee... Risk Boomerang

The simultaneous eruption of controversies surrounding The Born Korea is largely due to the company's marketing and risk management relying heavily on CEO Baek alone. Whenever various controversies arise, The Born Korea does not respond organizationally but is directly managed by CEO Baek. An industry insider said, "CEO Baek is currently using his personal channels to explain the controversies, which also means that risk management at the company level is completely lacking," adding, "Before going public, the controversies might have been easily avoided thanks to CEO Baek's familiar image, but after listing, the response is far from the responsible actions shareholders demand."

The company's value, which plummeted after the initial public offering (IPO), has shrunk further due to recent controversies. The Born Korea was listed on the KOSPI market in November last year at an offering price of 34,000 KRW during the popularity of the cooking entertainment show 'Black and White Chef.' At that time, the company was valued at 490 billion KRW, with a price-to-earnings ratio (PER) of 17.6 times. The Born Korea selected CJ Seafood, Daesang, Pulmuone, and Shinsegae Food as comparable companies, but faced criticism for being overvalued compared to comprehensive food companies despite being a franchise company with sales in the 400 billion KRW range.

As a result, The Born Korea's stock price plunged after listing. The concentration of sales in specific brands and the perception of limited growth potential dragged down the stock price. As of the first half of last year, Baekdabang's sales were 78.9 billion KRW, accounting for 44.6% of The Born Korea's total sales. Hong Kong Banjeom followed with 26.9 billion KRW, or 15.2%, meaning these two brands accounted for about 60% of the company's total sales. The Born Korea owns 25 dining brands, but the others lack a strong presence. Additionally, the food service industry's sensitivity to trends and volatile business conditions acted as negative factors.

On the first day of listing, the stock opened at 46,350 KRW, about 36% higher than the offering price, and surged to 64,500 KRW during the day. However, within a month, the stock price fell below the offering price, and the market capitalization, which once approached 800 billion KRW, halved to the 400 billion KRW range. On the 13th, when news of CEO Baek's criminal charge broke, the stock closed at 28,550 KRW.

The Born Korea's 260 Billion KRW War Chest... Will Baek Jong-won Overcome Risks Through M&A?

The food industry is paying attention to whether CEO Baek Jong-won can turn the situation around through mergers and acquisitions (M&A). At the time of listing last year, The Born Korea announced plans to use 93.5 billion KRW of raised funds for M&A, including 80 billion KRW for acquiring shares in wholesale and retail food companies and 13.5 billion KRW for acquiring shares in food tech-related companies. This year, the company recruited personnel from a major accounting firm to form an M&A team.

As of last year, The Born Korea's consolidated current assets (assets that can be converted into cash within one year) amounted to 263.9 billion KRW. Among these, cash and cash equivalents totaled 37.5 billion KRW, and short-term financial products accounted for 191.1 billion KRW.

The market speculates that since The Born Korea currently outsources most of its production to external companies, potential acquisition targets include food manufacturers that can reduce production costs and food service franchises such as chicken restaurants. Potential candidates include MG Food Solution, a sauce manufacturer valued at around 70 to 80 billion KRW, which Daol PE is currently trying to sell, as well as Norang Tongdak, which Q Capital and Koston Asia are selling. A representative of The Born Korea said, "As we mentioned at the time of listing, we are looking into M&A targets that can create business synergy, but there are no concrete plans at the moment," adding, "The utilization of cash funds may vary depending on the situation, so there is nothing to say at this point."

This content was produced with the assistance of AI translation services.