Global Private Equity Partners, has started selling Burger King in Korea and Japan for the first time in about six years, raising questions. This is because, despite COVID-19, its performance is getting better.

Recently, Burger King succeeded in increasing sales thanks to the use of digital platforms and the expansion of the number of offline stores. The industry believes that Burger King’s ransom has reached its maximum and is speeding up the sale.

The decision to sell 100% of the shares in Korea and Japan in about 6 years.

According to the investment banking (IB) industry on the 23rd of Jan, Affinity will begin the sale process of Burger King in Korea and Japan and send teaser letters (information) to candidates for the acquisition.

Subject to the sale is a 100% stake in BKR (Korea Burger King Corporation Bottle) and a 100% stake in Burger King in Japan. The industry estimates that Burger King’s “value” will reach up to 1 trillion won. It is about 15 times higher than last year’s operating profit (EBITDA) drainage.

Affinity acquired a 100% stake in BKR held by VIG Partners (Reporting Fund), a domestic private equity fund operator, for 210 billion won in 2016. The right to operate Burger King stores in Japan was purchased from the Global Burger King Brand International (RBI) in 2017.

Since then, Affinity has purchased ownership of Burger King in Japan owned by Lotte GRS for about 10 billion won in 2019, and will own both Korean and Japanese Burger King.

Burger King Has the largest number of stores in Asia…Getting bigger online and offline.

Burger King, acquired by Affinity, has grown rapidly. As of this month, the number of stores in Korea reached 440. In December 2019, it has already surpassed the number of McDonald’s stores (currently 403), making it the largest number of stores in Asia. There are 146 stores in Japan.

In particular, marketing using digital platforms led to earnings growth in line with the COVID-19 period. As of December last year, the number of monthly active users of Burger King brand applications (apps) exceeded 1.4 million. This is the highest number since the app was released in May 2016. Including the number of web users, the number of users is estimated to be 1.7 million per month.

Last year’s performance also maintained solid growth. According to the industry, Burger King’s sales reached about 680 billion won last year. EBITDA, an indicator of a company’s ability to generate cash, is about 80 billion won. This year, EBITDA is expected to reach 100 billion won due to store expansion and diversification of sales channels.

The reason for the sale is that the performance represented by the number of stores and sales has reached its highest level. An investment industry official said, “We believe that the timing of the sale has reached as we have steadily grown in size for four to five years since the acquisition of Korea Burger King in 2016.”

On the other hand, operating profit is a disadvantage in corporate valuation. Burger King’s operating profit in 2020 was 8.2 billion won, down 55% from a year earlier. Compared to 2018, it has decreased by about 9%. As of last year, the amount of debt obligated to repay amounted to 80 billion won. On top of that, one of the reasons for the sale is that the maturity of the fourth fund, which was invested in the acquisition of Burger King, is approaching.

We do not evaluate the value of the sale only with sales indicators, but we still judge it as an important factor, an industry source said. “We will have to wait and see if the transaction will take place at the amount estimated by the industry.”