[PE Now] Market Reaches Out First... VIG's Fourth Fund Gets Green Light

There is intense interest in the portfolio of VIG Partners, a first-generation homegrown private equity fund (PEF) manager in Korea. As portfolio companies that were invested in ahead of major market shifts begin to shine, they are receiving acquisition offers from multiple directions. With the sale of Preed Life as the starting point, there is an assessment that the signal for exits from the 4th fund has turned green.

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VIG Partners established its 4th blind fund in 2019 with a total size of 950 billion won. The fund’s portfolio includes: the online and offline knowledge-sharing platform DShare; funeral service provider Preed Life; The Skin Factory, operator of the beauty brand "Kundal"; waste treatment company BEF; fulfillment center Pasto; tea-specialized manufacturer Teazen; golf platform SmartScore; and low-cost carrier (LCC) Eastar Jet.

The first investment to be exited from the 4th fund was Preed Life. Starting with Good Life, VIG Partners acquired several mid-sized funeral service companies and then acquired and merged Preed Life in 2020, growing it into the No. 1 player in the domestic market.

Woongjin Group acquired Preed Life this April for 883 billion won. VIG Partners is reported to be realizing a return of more than four times its original investment in Preed Life. VIG had already recouped a significant portion of its investment early on through refinancing and partial stake sales. Specifically, it is known to have recovered around 250 billion won in total by selling 10% and 20% stakes in Preed Life to Mastern Partners in 2021 and to Kohlberg Kravis Roberts (KKR) in 2024, respectively.

Eastar Jet aircraft image. Eastar Jet

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There is also strong market interest in Eastar Jet, which ranks around fifth among Korean LCCs. As the restructuring of the domestic aviation industry accelerates with Korean Air’s acquisition of Asiana Airlines and the launch of an integrated LCC, multiple investors are reportedly approaching VIG Partners behind the scenes.

In response, VIG Partners’ position is that it will enter into sale negotiations if favorable terms are presented. In January 2023, VIG Partners invested 40 billion won to acquire 100% of Eastar Jet’s shares. At that time, Eastar Jet was undergoing corporate rehabilitation proceedings due to business difficulties caused by COVID-19. VIG Partners subsequently carried out a rights offering of 110 billion won, bringing Eastar Jet out of a state of complete capital impairment.

Eastar Jet resumed operations in February 2023, immediately after the acquisition, by obtaining reissuance of its Air Operator Certificate (AOC). This year, it also reacquired an AOC license in the cargo transportation segment, expanding its business scope. The number of aircraft, which had been only three before the acquisition, has increased to 15.

Eastar Jet’s enterprise value is being discussed at around 500 billion won. Another LCC, T’way Air, was valued at approximately 900 billion won at the time of its sale this February.

Daemyung Sono Group, the largest shareholder of T’way Air, is cited as one of the most likely buyers. After acquiring T’way Air, Daemyung Sono Group had planned to acquire and merge Air Premia, but recently suffered a setback when it lost the deal to Tire Bank. If it acquires Eastar Jet, T’way Air would be able to solidify its position as the No. 2 player in the LCC sector.

AK Group, the largest shareholder of Jeju Air, is also drawing attention. In the past, AK Group attempted to acquire Eastar Jet. Amid the LCC consolidation trend, Jeju Air is facing a decline in market share and a threat to its No. 1 position in the industry, so AK Group could pursue an acquisition to strengthen its competitiveness.

Tire Bank, which holds Air Premia, is also under the market spotlight. In May, Tire Bank signed a stock purchase agreement (SPA) with JC Partners to acquire a 22% stake in Air Premia and paid a 20 billion won deposit. The deadline for paying the remaining balance is the end of September this year.

Kundal product image. Kundal

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The sale of The Skin Factory, best known for its hair and body care brand "Kundal," is also under consideration. VIG Partners acquired 100% of The Skin Factory’s shares for 173 billion won in 2021 through its 4th fund.

With growing interest in K-beauty recently, multiple potential buyers are said to have proactively approached VIG Partners to sound out its intention to sell The Skin Factory.

The Skin Factory recorded consolidated sales of 116.4 billion won last year. This represents a 44% increase compared with 80.6 billion won in 2021, when VIG Partners acquired the company.

The sales growth was driven by rising overseas demand in markets such as the United States, Southeast Asia, and Japan. In particular, sales have climbed steeply as the K-beauty boom intensified after the acquisition.

In 2023, VIG Partners also pursued a bolt-on strategy by acquiring the cosmetics brand Nacific, known for its "Yok Serum." It expanded its business scope beyond its existing strengths in shampoo and household goods into the basic and color cosmetics markets.

Considering the company’s business expansion and the K-beauty boom, the sale price of The Skin Factory is estimated to easily exceed several hundred billion won. Some observers argue that, given the steep growth trajectory of K-beauty, it would be better to wait and sell when sales are maximized over time.

A VIG Partners representative said, "Three to four years ago, we focused on maximizing corporate value and often chose to wait if the price was not satisfactory, but we have recently revised our M&A stance. If the price is reasonably good and we can return a satisfying profit to our limited partners (LPs), we proceed with a sale. This is because the importance of the DPI (distributions to paid-in capital) metric has increased."

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