A Twosome Place IPO faces skepticism

A Twosome Place, a coffeehouse chain headquartered in Korea aiming to go public, sent out a request for proposal (RFP) for its initial public offering (IPO) recently to some securities firms.

According to the investment banking industry earlier this week, A Twosome Place emailed the RFP to major securities firms in Korea at the end of last month.

The issuance of the RFP means that the coffeehouse chain has officially inquired about the willingness of investment banking firms to join the bid to become underwriters or land managers of the IPO.

Founded by CJ Foodville, A Twosome Place opened its first store in 2002 in Sinchon, a bustling commercial district in western Seoul. The number of nationwide chain stores exceeded over 100 by 2010, and from 2011, the coffeehouse chain started to open branches in foreign countries, including China. As of the end of 2020, the number of stores in Korea exceeded 1,400, with dozens more overseas.

Once the most lucrative arm of CJ Foodville, it is now owned by foreign private equity firms led by Hong Kong-based Anchor Equity Partners. In early 2018, CJ Foodville sold a 40 percent stake in A Twosome Place for around 180 billion won ($159 million) to the consortium of private equity firms, which also includes Singaporean sovereign wealth fund GIC, the Canada Pension Plan Investment Board (CPPIB).

Anchor Equity Partners bought an additional 45 percent stake in the coffeehouse chain for 202.5 billion won the following year, gaining management control. About 160 billion won of the money came from Tumbler Asia, a special purpose company (SPC) consisting of Anchor Partners, GIC and CPPIB.

In 2020, the Hong Kong-based private equity firm bought the remaining 15 percent stake for 71 billion won.

Currently, SPC Tumbler Asia is the largest shareholder, owning over a 73 percent stake in the coffee chain business.

Despite the shock from the global pandemic, A Twosome Place saw 2020 sales increase 10.3 percent yearon-year to 365.4 billion won, while operating profit grew by an impressive 8.7 percent to 38.8 billion won.

The investment banking industry estimates the coffeehouse chain’s corporate valuation to easily exceed 500 billion won, given that its 100 percent stake was valued at over 450 billion won two years ago when it was sold to the PEFs.

Unproven

While Anchor Equity Partners, as well as its other partnering institutions, such as GIC and CPPIB, are hoping to pursue a profitable exit through the IPO, it remains uncertain if the coffeehouse chain’s IPO will be a success.

“Although the chain’s annual revenue last year increased year-on-year, now is not the best time for coffeehouse businesses globally due to the pandemic situation,” a market insider pointed out. “It seems they hope to exit through the IPO, when the stock markets are bullish, since an exit through a sale doesn’t seem feasible at this point.”

Another uncertainty is the fact that there is no precedent of a successful coffeehouse chain going public in Korea, making securities firms opt for a wait-and-see strategy.

If it proves to be a success, other coffeehouse chains in Korea are expected to follow suit. Ediya Coffee selected Mirae Asset Securities in late 2017 as its book runner for an IPO, hoping to list itself in the near future. The Coffee Bean Korea, currently up for sale, might also choose to pursue an IPO.