[Edaily Marketin Song Seung-Hyeon Reporter] The sale of Mom’s Touch is set to get underway with a preliminary bidding round at the end of this month. While the sellers are hoping for a price of around 1 trillion won, attention is focused on the offers potential buyers will make, given that recent transactions involving restaurant franchises have closed at levels below initial expectations.

According to investment banking (IB) industry sources on the 17th, KLN Partners and the lead underwriter, Citigroup Global Markets Securities, will conduct a preliminary bidding round at the end of this month, followed by a final bidding round in November. The asset up for sale is the 100% stake in Mom’s Touch & Company held by KLN through the special purpose company (SPC) Korea F&B Holdings. The process involves shortlisting qualified bidders during the preliminary bidding phase, followed by due diligence, and finally accepting proposals containing prices and acquisition terms during the final bidding phase. It is reported that both domestic and international financial investors (FIs) and strategic investors (SIs) are showing balanced interest.

Mom’s Touch’s consolidated revenue increased by 65.8%, from 288.9 billion won in 2019—when KLN acquired the company—to 479 billion won last year. Over the same period, operating profit rose by 373%, from 19 billion won to 89.7 billion won, and the operating profit margin stood at 18.7% last year. Consumer spending across approximately 1,490 stores nationwide totaled 1.0058 trillion won, marking the first time the company has surpassed the 1 trillion won threshold since its founding. Considering that last year’s earnings before interest, taxes, depreciation, and amortization (EBITDA) was in the 100 billion won range, the 1 trillion won valuation represents an enterprise value (EV) multiple of 10 times EBITDA.

Overseas expansion is also cited as a basis for the valuation. Starting with a master franchise agreement in Thailand, the company has expanded its store network by opening a pop-up store in Tokyo in 2023 and its first company-owned store in Japan in 2024. At its first Singapore store, which opened on the 14th of last month, approximately 200 people were waiting in line even before the doors opened.

KLN acquired a 56.8% stake in Mom’s Touch for 193.8 billion won in 2019. In 2022, it invested an additional approximately 120 billion won to conduct a tender offer, followed by a voluntary delisting; it subsequently increased its ownership stake to 100% through measures such as the cancellation of treasury shares. It is reported that through three rounds of refinancing and recapitalization since 2022, KLN has already distributed amounts exceeding twice the principal to institutional investors (LPs). Consequently, some in the industry believe KLN has little incentive to artificially inflate the price.

This is the second attempt at a sale. Immediately after delisting in 2022, KLN pursued a sale with Deutsche Securities as the lead underwriter, but the deal fell through. At the time, PAG, Goldman Sachs PIA, and the U.S. restaurant brand YUM! participated in the preliminary bidding, but the price of around 600 billion won offered by PAG fell short of the sellers’ expectations.

A key variable is the price range of recently completed transactions. Gongcha, which Bain Capital decided to acquire on the 5th of last month, was sold for approximately $635 million (about 900 billion won)—significantly below the $2 billion (about 2.7 trillion won) initially discussed. Five days later, the transaction value for Bonchon International, which VIG Partners sold to Thailand’s Minor Group, also hovered around 300 billion won. Critics continue to point out that franchise transaction multiples have not yet recovered to pre-COVID-19 levels.

The planned sale of BKR, which operates Burger King and Tim Hortons, scheduled for the end of the year, is also a factor to consider. Affinity Equity Partners, which holds a 100% stake, has selected Deutsche Securities as the lead underwriter, and a valuation of up to 1 trillion won is being discussed. There is speculation that the outcome of the Mom’s Touch bidding process could serve as a pricing benchmark for subsequent transactions.