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Korea Sweet Potato Latte Pioneer Said to Start $300 Million Sale

  • Local buyout firm asks for Hollys Coffee bids by end of August
  • IMM tests Chinese private equity funds’ interest in cafe chain

South Korea’s Hollys Coffee, which popularized 430-calorie sweet potato lattes as an unusual alternative in the caffeine-addicted country, has started looking for a new owner.

Buyout firm IMM Private Equity Inc. has kicked off an auction of its controlling stake in the homegrown cafe chain, which it is seeking to sell for as much as $300 million, according to people with knowledge of the matter. The Seoul-based fund sent out information on the Hollys Coffee business to interested parties and asked for first-round bids by the end of August, the people said, asking not to be identified as the information is private.

IMM is targeting potential buyers including Chinese private equity firms, according to one of the people. The Korean buyout firm is selling its 92 percent stake in Hollys Coffee, while the chain’s chief executive officer, Shin Sang-chul, is selling about 1 percent, another person said.

South Koreans often pay more than New Yorkers at the nation’s cafe chains, which have been romanticized by popular television dramas including “Coffee Prince.” The market for coffee shops in South Korea is expected to grow to $3.8 billion by 2020, from $2.8 billion last year, according to Euromonitor International. 

Cheesecake Frappes

Chinese buyers have stepped up their purchases of assets in neighboring South Korea, with acquisitions reaching a record $2.5 billion last year. Hollys Coffee, founded in 1998, would bring a buyer a chain of more than 350 outlets selling drinks ranging from cold-brew coffee to Korean-style citron tea and berry cheesecake frappes.

The company recorded earnings before interest, taxes, depreciation and amortization of 14.2 billion won ($12.8 million) last year, on revenue of 109 billion won, one of the people said. A representative for IMM Private Equity said the sale of its Hollys Coffee stake is in progress, declining to comment further. A representative for Hollys Coffee declined to comment.

Hollys Coffee ranks eighth among coffee chains in South Korea with a 4.8 percent market share last year, according to Euromonitor. It trails market leader Starbucks Corp., which had 23.9 percent, and local competitors including Ediya Co. and Caffe Bene Co., the data show. 

IMM first invested in 2013 in Hollys Coffee, which has increased revenue 35 percent annually over the past four to five years, according to the buyout firm’s website. Hollys Coffee run cafes across the country as well as in China and Southeast Asia under a franchise model.

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