2x Return on Principal... Private Equity Firm VIG Nears Successful Exit from Fund III

All Remaining Portfolio Companies Nearing Exit
Green Light for Sixth Fund Formation... Third-Generation Management Accelerates

VIG Partners, a leading first-generation private equity fund (PEF) manager in Korea, is on the verge of recovering the capital invested in its third blind fund, which is set to mature next month. The fund's multiple on invested capital (MOIC) is expected to exceed 2x. Building upon the success of its fifth fund, established earlier this year, VIG is expected to gain momentum for the launch of its sixth fund.

According to the investment banking (IB) industry on August 7, VIG is in the final stages of selling its remaining third fund portfolio companies: Yooyoung Industrial, Bonchon International, and Autoplus. For Yooyoung Industrial, a shoe materials company, VIG signed a share purchase agreement (SPA) with PEF manager Fourcom Partners this past June. Currently, Fourcom Partners is raising funds to acquire Yooyoung Industrial. The company is being valued at around 150 billion won. VIG acquired Yooyoung Industrial for 220 billion won in 2017.

Founded in 1992, Yooyoung Industrial manufactures textile materials for shoe fabrics and supplies materials to global brands such as Nike, Adidas, and New Balance. The UK's Coats, the world's largest textile company and a strong candidate for acquisition, showed interest and conducted due diligence to acquire management control. However, after the outbreak of the war between the US and Iran and the subsequent rise in oil prices, the company chose to focus on its core operations, including managing affiliates, and reportedly withdrew its bid.

The sale of Bonchon International (Bonchon Chicken), the restaurant franchise, is also expected to conclude soon. Sell-side advisors BDA Partners and William Blair have selected an overseas strategic investor (SI) as the preferred negotiation partner and are currently negotiating the SPA. Bonchon Chicken operates over 150 locations in the US and approximately 500 worldwide. VIG acquired a 55% controlling stake for 60 billion won in 2018. Last year, Bonchon Chicken’s earnings before interest, taxes, depreciation, and amortization (EBITDA) reached approximately 14 billion won. The company is reportedly being valued at around 300 billion won.

Meanwhile, for Autoplus, which operates the used car brand "Re:Born Car," negotiations for its sale to Hyundai Glovis are believed to be in the final stages. VIG acquired 100% of the shares for 110 billion won in 2017, with the current sale being discussed at approximately 200 billion won.

Once these pending portfolio company sales are finalized, the third fund's MOIC is expected to exceed 2x. Major sales have already been completed, including lens manufacturer Starvision (sold for 420 billion won), food distribution company Foodist (250 billion won), funeral service provider Freed Life (883 billion won), and mask pack sheet company PNC Labs (86 billion won).

If the remaining three companies are successfully sold, the total capital invested in the third fund is expected to reach 1.1101 trillion won, while returns are expected to record 2.289 trillion won, equating to an MOIC of 2.06x. If dividends received from portfolio companies during the holding period are included, the total return is expected to be even higher. Starvision and Freed Life were key deals driving the fund's performance. VIG bought Starvision from founder and former Vice Chairman Park Sangjin for 104.5 billion won in 2018 and ultimately sold it for 420 billion won, delivering the highest multiple return of 4.02x. If the Bonchon Chicken transaction closes as expected, it will achieve the fund’s highest multiple of 5x. In contrast, VIG failed to recover the principal investment from PNC Labs and Yooyoung Industrial.

This result for the third fund is expected to have a positive impact on the launch of the sixth fund. This is especially notable as the dry powder (undeployed capital) of the fifth fund—which was launched at the beginning of this year—is expected to decrease significantly. Last month, VIG was selected as the preferred bidder for aerospace parts manufacturer Yulgok. The expected transaction price is in the 400 billion won range, and fifth fund capital is likely to be used. If this acquisition closes, with the fifth fund totaling 700 billion won, more than 80% of the fund’s capital will have been expended. Accordingly, preparations for the sixth fund are expected to accelerate. From the sixth fund onward, CEO Shin Changhoon will oversee everything from fund formation to portfolio management, marking the beginning of VIG’s third-generation management system.

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