Classys’ products on display at an exhibition
Bain Capital has embarked on the process to sell a majority stake in Classys Inc., a South Korean medical aesthetic device maker, a deal estimated at around 3 trillion won ($2.2 billion), or more than four times its purchase price, according to people with knowledge of the matter on Monday.
The US private equity firm is contacting investment banks to discuss the deal structure and conditions for what would be its third exit from a South Korean beauty company and the sector’s largest-ever M&A deal. It plans to pick an underwriter as early as the end of this year.
Bain is putting about a 60% stake in Kosdaq-listed Classys on the market at a premium of about 25% to its market price as of Monday close, two and half a years after buying it for 670 billion won.
(Screenshot captured from Classys website)
Classys is well-known for the beauty device Shurink Universe, using high-intensity focused ultrasound (HIFU) for skin tightening. It is the country’s unrivalled leader in the HIFU treatment device market with a 55% share.
Its rapid growth, at a faster pace than Bain Capital’s forecast, has encouraged the private equity giant to bring forward its exit timing, the sources told Market Insight, The Korea Economic Daily’s financial market news outlet.
DOUBLE-DIGIT GROWTH
Its operating profit jumped 34% on-year to 57.7 billion won in the first half of this year, with sales up 28.5% to 109.1 billion won. Its operating profit margin was a whopping 52.9% in the first half of this year.
Bain Capital has focused on expanding Classys’ global operations, which make up 68.7% of its revenue as of the end of August, versus 42.4% when it was in the hands of its founder and former CEO Jung Sung-jae.
It is rapidly building its presence in Brazil, Australia, Thailand and Taiwan, while preparing to foray into the US and China, the world’s two biggest beauty markets.
In 2023, Bain Capital acquired another domestic aesthetic device manufacturer Ilooda Co,, which Classys absorbed this year.
Classys’ major products
Industry observers said Classys has more room to grow as the anti-aging device market is entering the stage of popularization.
The global beauty device market is forecast to double to $11.2 billion by 2028 from $5.6 billion in 2022.
The steady demand for device expendables is expected to prop up Classys’ bottom line. Expendable supplies account for 87% of its device sales in the second quarter of this year.
Seoul-based private equity firm Hahn & Co., LG Group and Samsung Group are touted as potential buyers of Classys.
In February, Hahn & Co. acquired Lutronic Co., a domestic skin care device manufacturer.
By acquiring Classys, LG H&H Co., a daily necessities and beauty products maker, could diversify its beauty portfolio heavily dependent on China. Samsung has Samsung Medison Co., a medical device manufacturer, under its wing.
HIGH VALUATION
However, Classys’s high valuation might put off potential bidders.
Its market capitalization of nearly 4 trillion won is more than 40 times its earnings before interest, tax, depreciation and amortization (EBITDA) of 93.6 billion won in 2023.
“Classys has high profitability and growth potential. But its estimated price, a multiple of 40 to 50 times EBITDA, is too high to draw bidders,” said an industry observers.
Classys’s new anti-aging device Volnewmer
Since 2017, Bain Capital has made lucrative divestments in South Korea from skincare brand Carver Korea and Hugel Inc., the country’s largest botox producer.
It reaped a sevenfold return from its 430-billion-won purchase of Carver Korea in 2017, just one year after its investment. The exit of Hugel generated more than a 20% internal rate of return, or nearly 1 trillion won in proceeds.
By Jong-Kwan Park and Jun-Ho Cha
pjk@hankyung.com
Yeonhee Kim edited this article.
