Unison Capital in final stages of talks to sell Gong Cha to US PEF

  • 2019-07-31

Unison Capital Inc. is in the final stages of negotiations to sell Taiwan-style milk tea brand Gong Cha to US private equity firm TA Associates for around 350 billion won ($296 million), which is likely to return nearly five times its investment in the bubble tea brand in five years.

Asia-based private equity firm Unison Capital is planning to sign a share purchase agreement with TA Associates as early as mid-August to sell 100% of Gong Cha, according to investment banking sources on July 30.

The transaction value of 350 billion won is about 11 times Gong Cha’s 2018 earnings before interest, taxes, depreciation and amortization (EBITDA) on a consolidated basis and seven times its projected 2019 EBITDA.

The multiple is lower than the industry average of 15 to 17.

For Unison Capital which controls 76.9% of Gong Cha, however, the expected proceeds of 270 billion won are almost five times its equity investment of around 60 billion won in the franchise operator.

After acquiring Gong Cha’s South Korean operations in 2014, the private equity house took over its global headquarters in 2017.

For the acquisition, Korean pension funds and financial services companies participated as limited partners, including the National Pension Service, the Government Employees Pension Service, the Public Officials Benefit Association, The Export-Import Bank of Korea, Seoul Guarantee Insurance Co. and KB Insurance Co. Ltd.

The remaining 23.1% stake is owned by Martin Berry who introduced the bubble tea brand to South Korea in 2012 with his wife and sold the majority stake to the private equity house in 2014.


For TA Associates, the upcoming deal will become its first investment in South Korea.

To shore up profit margins at Gong Cha, Unison Capital has refrained from opening new outlets since 2016 and reduced the proportion of franchise stores to below half in sales. Instead, it increased the number of directly-controlled stores.

As of June 2019, Gong Cha runs 1,044 stores in 17 countries.

Its EBITDA more than quadrupled to 32 billion won in 2018 from 7.6 billion won in 2013. This year’s EBIDTA is projected to exceed 50 billion won on sales of 180 billion won.

Although fascination for bubble tea, also called pearl milk tea, has lost steam, the global bubble tea market is projected to grow to $3 billion by 2023 from $2 billion in 2016, helped by the introduction of new flavors and decrease in demand for carbonated drinks, according to an Allied Market Research report in 2018.

The transaction, if closed, will be made less than a year after Unison Capital put Gong Cha on the market.

The sale is being handled by Goldman Sachs and law firm Yulchon LLC. Another Korean law firm Bae, Kim & Lee LLC and accounting company Deloitte are advising the deal.

Meanwhile, South Korea-based IMM Private Equity has been seeking to sell Hollys Coffee which it acquired in 2013.

Last week, a private equity consortium of US-based Advent International Corp., Mirae Asset Private Equity and Taiwan’s CDIB Capital exited their investment in The Coffee Bean & Tea Leaf in six years.

By Hugh YH Jeong


<Edited by Yeonhee Kim>

(Photo: Getty Images Bank)