Bain Capital seals 3rd beauty M&A deal in S.Korea

Bain Capital on Thursday agreed to buy a majority stake in South Korea's medical aesthetic device manufacturer Classys Inc. for 670 billion won ($560 million), marking its third acquisition of a Korean beauty company.

The acquisition followed the US private equity firm's two high-profile beauty deals sealed in the country between 2016 and 2017, including Carver Korea, which it sold to British consumer goods brand Unilever PLC for 3 trillion won in 2017. The two transactions topped the list of the most profitable exits in the country's M&A market. 

Under the Thursday agreement, Bain acquired a 60.84% stake in Classys from its founder and CEO Jung Sung-jae, his wife Lee Yeon-joo and their two children, according to the company's regulatory filing.

The PE firm paid 17,000 won per share of Classys, slightly above its Wednesday's close of 15,950 won, but 38% below its all-time high of 27,200 won touched in August 2021.

Before the transaction, Jung and his three family members held a combined 73.77% stake. Jung and Ms. Lee will remain friendly shareholders for the next few years with a combined 12.93% stake, according to the company.

Its current market value of 980 billion won represents an eightfold increase from the 120 billion won valued in December 2017, when it made a debut on the country's junior stock market Kosdaq through a merger with a special purpose acquisition company (SPAC).

Among Kosdaq-listed companies that merged with SPACs, it currently has the highest market value.

Established in 2007 by dermatology specialist Jung, Classys supplies medical devices used for cosmetic procedures such as plastic surgery, anti-aging and excess fat removal.

The company owns three brands: Classys specializing in medical devices for clinics; Cluederm used at aesthetic clinics; and Skederm for personal beauty-care devices.

PRODUCTS, EARNINGS

Its flagship product, Shurink, is an ultrasound-based device used at clinics to remove facial wrinkles and stimulate collagen reproduction in the skin. It has been rapidly gaining market share since 2019, thanks to its moderate price and less painful therapies compared to rival devices.

Its exports have been on the steady rise, led by China and South America. In particular, it is gaining popularity in Brazil, which ranks among the world's largest cosmetics markets.

Classy's operating profit has tripled to 52 billion won in 2021 versus 17 billion won in 2018. Consolidated sales more than doubled to 100 billion won during the period.

This year, its operating profit is forecast to rise 35% on-year to 70 billion won, with sales seen up by one-fourth to 125 billion won, driven by new products such as Shurink Universe and Volnewmer.

Shurink Universe is a high-intensity focused ultrasound (HIFU) treatment device for skin tightening, and Volnewmer is a radio frequency-based medical device.

"Bain Capital bet on Classys' global expansion," said an investment banking industry source. "A combination of Classys' technology and Bain Capital's global network should create synergy for its exports."  

Bain Capital has been putting its focus on the cosmetics industry and other consumer businesses in South Korea, since Managing Director Lee Jungwoo joined the PE firm in 2015. Having worked at Morgan Stanley's PE division in Seoul, Lee specializes in consumer, media, retail and technology sectors.

Bain Capital's 430 billion won acquisition of a skincare brand Carver Korea in 2016, jointly with Goldman Sachs, generated a sevenfold return just in one year. 

For Hugel Inc., the country's largest botox maker, Bain Capital took advantage of the conflict between its two co-founders, who locked horns not to give up their management rights over the company. It finally bought a majority stake in Hugel from the co-founders in 2018.

The PE house is now set to pocket close to 1 trillion won in proceeds from the sale of a 46.9% stake in Hugel for $1.48 billion to a consortium of Korea's retail-focused GS Group, Abu Dhabi’s sovereign investor Mubadala Investment Co., Singapore-based private equity firm CBC Group and Seoul-based IMM Investment Corp.

Write to Si-Eun Park and Jun-Ho Cha at seeker@hankyung.com
Yeonhee Kim edited this article.