The PE firm pursued an industry consolidation thesis, creating Foodist from three constituent parts and increasing revenue sixfold, building nationwide coverage, and embracing digitalisation

VIG Partners acquired processed food distributor Winplus in 2018 as the platform asset for a broader South Korean business. Within two years, Winplus had merged with Foodist, a catering unit of Hanwha Group Hotel & Resort, and bought Homenuri Mart, a small food distribution player. The company then rebranded as Foodist.

The initial attraction was the underserved nature of the target segment. While large chain restaurants in Korea are adequately supplied by chaebol-owned operators, smaller chef-owned restaurants have historically lacked a large corporate ingredients and logistics provider. This is despite these smaller players generating the bulk of industry revenue.

Sajo Group, a diversified agri-food conglomerate best known for its seafood interests, has now agreed to buy Foodist at a valuation of KRW 285bn (USD 205m), or 11x EBITDA; the transaction is expected to formally close in August. Jason Shin, a senior partner at VIG, observed Foodist’s publicly listed peer group trades at around 6x-7x EBITDA.

“We were about to run a limited auction when Sajo came to us unsolicited asking to do a bilateral deal. We declined right away, but they kept coming back. Their third offer was something we found satisfactory,” Shin said, noting that VIG expects a 2.2x return on an investment with an initial cost – before add-ons – of about KRW 45bn.

“There are no other nationwide food supply players available for their acquisition. Everything else is already in the hands of other chaebol groups. This is literally the only independent player. They also saw a lot of synergy in Foodist because they’re not that strong in distribution, and this gives them immediate nationwide distribution network and infrastructure.”

It marks the second full exit for VIG’s third flagship fund, which closed on USD 600m in 2017. The first came in 2022 with the founder of eyewear brand Star Vision buying back a majority stake in a deal that generated VIG a 2x return.

Last February, VIG reached a first close of KRW 470bn on its fifth fund, which is targeting about USD 1bn – up from USD 810m for Fund IV – amidst a ramp-up in exit activity.

Two portfolio companies feature prominently in Mergermarket’s Likely-to-Exit (LTE) algorithm.* Funeral services operator PreedLife and used car business AutoPlus, acquired in 2016 and 2017, respectively, have LTE scores of 79 and 76 out of 100. Shin said both companies were fielding offers from financial and strategic buyers and that it was too soon to call what type of sale will occur.

A larger footprint

It’s worth noting that all these investments have played on the theme of industry consolidation and related M&A. With Foodist, the increasingly international nature of VIG’s LP base proved instrumental in fulfilling the playbook.

The carve-out of Foodist from Hanwha was 100% financed by VIG’s international LPs taking an opportunity to double down on a company and industry they already know. International investors accounted for 30% of Fund II and 50% of Fund IV. Korea LPs have been historically less keen on making pure equity co-investments.

Shin described the deal as being at a “very reasonable price.” Most significantly, it took the company from a footprint of 15 restaurant supply hypermarkets in the Seoul area to a nationwide network with distribution hubs in six urban areas. These hubs cater to small restaurants under the radar of chaebol suppliers, as well as the likes of schools, hospitals, and workplace cafeterias.

Annual revenue increased from about USD 150m (Winplus in 2018) to USD 929m in 2023, with most of the growth coming since 2021. “The macro was against us for the first two years because after COVID hit, like everywhere in the world, there were lockdowns and restaurants had to close early,” Shin said.

In addition to the nationwide expansion, Foodist benefited from digitalisation. Restaurant owners that habitually shopped in-person at logistical hypermarkets or via slower call-in catalogues switched to next-day online orders.

This transition has also facilitated marketing to a customer base theoretically encompassing hundreds of thousands of small restaurants and cafeterias that have never been collectively targeted by a single, corporatized offering. Annual sales in Foodist’s own-branded products are therefore said to have increased more than 5x under VIG’s ownership.

“To be successful in a consumer business, you need to have your own brand, which comes with a loyal customer base and larger margin,” Shin added. “That’s something that we’ve been emphasising, and we have no doubt that the brand will grow much further under a chaebol’s ownership because they have much more of a nationwide presence.”

*Mergermarket’s LTE predictive analytics assign a score to sponsor-backed companies to help track and predict when an exit could occur through M&A, an IPO, a direct listing or a deSPAC transaction.