Pelicana-backed PEF to close W20b deal to acquire Mr. Pizza

South Korea’s private equity fund backed by fried chicken franchise Pelicana Chicken is on the verge of closing a 20 billion won ($18.1 million) acquisition deal to become the biggest shareholder of MP Group, which owns pizza restaurant franchise Mr. Pizza and coffee chain Manoffin, a filing showed Tuesday.

The deal will reach a final close once MP Group gets the green light to resume trading on the Korea Exchange’s development bourse Kosdaq in a decision affecting some 10,000 small shareholders, the filing also showed.

MP Group shares have been suspended from trading on the Kosdaq since 2017 as MP Group’s owner family including founder Jung Woo-hyun have been mired in reputation risks. Jung stepped down from the management in 2017 as he was accused of embezzlement and breach of trust. Plans to review MP Group’s eligibility for listing are yet to be determined, according to KRX.

The PE fund, created in September and co-managed by Korean investment houses Ulmus Investment and TR Investment, has completed the payment in exchange for up to 40 million ordinary shares to be newly issued by MP Group in an upcoming capital increase. The new shares -- priced at 500 won each -- will account for 33.1 percent of voting rights. According to the filing, the fund pooled money from investors including Pelicana Chicken.

The fund is expected to become one of the new shareholders along with the proposed buyers of existing 10 million shares from the troubled owner family for 13 billion won.

As a result of the capital increase, the owner families’ total ownership of MP Group will be reduced to 24.4 percent if the KRX decides not to delist MP Group from Kosdaq.

To normalize business operations, MP Group has been searching for a new shareholder with Samil PricewaterhouseCoopers since June.

MP Group has been in the red since 2015, putting the company at risk of being delisted by market authorities. The losing streak is expected to continue this year as MP Group recorded a 11 billion won net loss during the January-September period, up nearly fourfold from a year prior.

This is the latest of a series of mergers and acquisitions of Korean food and beverage franchises playing out in the second half of this year amid the ongoing pandemic.

In October, Korea’s chemical-to-financial business group KG Group closed on its acquisition of Holly’s Coffee, buying 93.85 percent stake for 145 billion won from IMM Private Equity.

Also in October, a consortium of investment firms Q Capital Partners and Corstone Asia bought a 100 percent stake in Norang Food for 70 billion won. Norang Food operates fried chicken franchise Norang Tongdak.

Investment banking sources say up for stake sales are CJ Foodville-owned bakery franchise Tous Les Jours, the Korean operations of casual dining restaurant chains such TGI Fridays and Outback Steakhouse, of coffeehouse chain Coffee Bean & Tea Leaf and of fast food chain Popeyes.

By Son Ji-hyoung (consnow@heraldcorp.com)