Carver Korea, a leading Korean cosmetics company, said that Bain Capital Private Equity, a global private equity firm, and Goldman Sachs (NYSE: GS), a leading global investment bank and active investor in Korea, have agreed to acquire a majority stake in the company from existing shareholders. The value of the deal is said to exceed 350 billion won ($307 million).
Carver’s founder and chairman Mr. Lee Sang-rok will continue to hold a minority stake in the company and participate in day-to-day management. The new funds will foster further domestic growth and stimulate overseas expansion, Carver said. This transaction marks Bain Capital Private Equity’s first investment in Korea.
Founded in 1999 as a specialty cosmetics supplier to aesthetic salons, Carver is one of the leading companies at the forefront of today’s global demand for “K-Beauty,” an umbrella term for the variety of beauty products from Korea exported around the world.
The company has an established a skincare product portfolio which combines beauty with science to compete in the most lucrative segments of the global cosmetics industry, such as eye creams, essences and toners. Its portfolio of beauty product brands include its flagship skincare line A.H.C (Aesthetic Hydration Cosmetics) which is promoted by a number of Korea’s most popular celebrities.
Carver currently sells approximately 1,000 different cosmetics products in Korea, China and the United States through diversified distribution channels, including home shopping television networks, retail stores, duty free shops, beauty salons, skincare clinics and internet commerce.
The deal comes as “the influence of Korean dramas and Korean pop has been unprecedented, not just in the beauty industry but also for luxury, apparel, consumer electronics and consumer food services, with items featured in music videos and TV dramas in high demand among consumers,” said Nicole Tyrimou, category strategy analyst at Estée Lauder Companies.
South Korea is in the limelight not only because of the popularity of k-pop and k-dramas around Asia but also “due to the rise of the k-beauty phenomenon which is transforming the beauty industry,” added Tyrimou, noting that one of the key beneficiaries from this wave is AmorePacific (KSE: 90430), one of the leading cosmetics companies in South Korea. Its chairman and controlling shareholder Suh Kyung-Bae, who inherited the company from his father and turned it into one of the world’s most innovative companies, becoming one of the country’s wealthiest people with a current net worth of more than $9 billion according to Forbes, further fueled by the global popularity of all things Korean.
The Korean beauty industry has been growing rapidly as international demand for the country’s domestic brands continues to increase. This is especially the case in mainland China, the largest and fastest growing beauty market in the world according to Euromonitor. Since 2011, according to the Korea International Trade Association, the average revenue of Korean cosmetics exports to China has grown annually at a CAGR of more than 50 percent and, by country of origin, today Korea is the second-largest exporter of cosmetics to China after France.
As of May 2016, Carver has exceeded its total sales of 150 billion won (approximately US$130 million) recorded for 2015, representing a year-on-year growth of more than 200 percent, the company said.
“Korea is a very attractive market with many innovative and globally competitive companies,” said Jonathan Zhu, a managing director at Bain Capital Private Equity. “We have been building Korean expertise into our Asia team and looking for investment opportunities. Carver Korea has an attractive portfolio of brands and significant opportunities for growth both domestically and internationally.”
“Korea is home to one of the most sophisticated cosmetics markets in the world and the global demand for the country’s beauty products is reaching new heights,” said Jeff Hyun Seok Kim, a managing director at Goldman Sachs. “Our investment in Carver’s innovative and talented founder and management team exemplifies Goldman Sachs’ aim to partner with Korean corporate leaders who are able to develop and offer world-class products.”
Bain Capital is expected to help accelerate Carver’s global ambitions, enabling it to access increasing demand in markets including the United States, China and Southeast Asia. Bain Capital Private Equity has extensive global experience in consumer industries, across multiple sub-sectors including retail, dining, leisure, as well as personal care products through its investment in Sundial Brands.
Bain Capital Private Equity has partnered closely with management teams to provide the strategic resources that build great companies and help them thrive since its founding in 1984. Its team of more than 400 investment professionals creates value for its portfolio companies through a global platform and depth of expertise in key vertical industries including consumer/retail, financial and business services, healthcare, industrials, and technology, media and telecommunications. In addition to private equity, Bain Capital invests across asset classes including credit, public equity and venture capital, and leverages the firm’s shared platform to capture opportunities in strategic areas of focus.
Goldman Sachs is one of the largest and most experienced foreign investors in Korea with investments exceeding US$2.5 billion since 1999. Goldman Sachs Group Inc. is a global financial services company that offers a broad range of financial services in various areas such as investment banking, securities and investment management to corporates, financial institutions, governments and individuals. Founded in 1869 and based in New York, the firm maintains branch offices in London, Frankfurt, Tokyo, Hong Kong and other key financial centers around the globe.