Editor’s Note
This article reports on the potential sale of the Japanese jewelry brand Tasaki by MBK Partners to a consortium of private equity firms. While the original text indicated an agreement was in place, subsequent developments have led to the deal’s cancellation. We have updated our coverage to reflect this outcome.
According to the investment banking industry on the 13th, MBK Partners is currently in negotiations to sell the Japanese jewelry brand Tasaki. MBK Partners is scheduled to sign a stock purchase agreement in June to sell 100% of its stake in Tasaki to a consortium comprising the Hong Kong-based private equity fund FountainVest Partners and the Japan-based private equity fund Unison Capital.
It is known that both parties have agreed on Tasaki’s enterprise value at around $600 million (approximately 820.7 billion KRW). This means MBK Partners will achieve a return of over two times its initial investment, 16 years after acquiring Tasaki.
Tasaki is a jewelry brand founded in 1954. It is particularly recognized as a global luxury brand for its quality, managing the entire process from pearl oyster cultivation to pearl harvesting, processing, and sales.
However, due to excessive facility investments and the market expansion of low-cost Chinese pearls, Tasaki once faced bankruptcy. Despite being a company representing the history of the Japanese jewelry market, during the financial market turmoil caused by the Lehman Brothers crisis and the subprime mortgage crisis, no one was willing to readily provide funds to a company producing high-end jewelry.
It was MBK Partners that extended a helping hand to Tasaki at that time. Although MBK Partners was merely a fledgling private equity fund, only four years old at its establishment, it decided to invest in July 2008 on the condition of taking over management control.
After gaining control of Tasaki, MBK Partners first downsized the company. It closed 7 out of 9 pearl farms and conducted voluntary retirement for 483 employees, representing 40% of the total workforce. It also sold owned real estate, including training centers and employee dormitories. The funds secured through restructuring and asset sales were used to repay debt and reduce interest burdens.
The funds freed up from reduced interest burdens were then invested in opening new stores and developing new products. MBK Partners focused on creating a luxury brand differentiated from low-cost Chinese pearl products. To this end, it appointed Toshikazu Tajima, who had worked as a designer at the Japanese subsidiaries of luxury brands Gucci and Christian Dior, as the company’s CEO, and hired world-renowned designer Thakoon Panichgul as the creative director. Five years after transitioning to a luxury brand, Tasaki successfully turned a profit in 2013. From 2015 onwards, it expanded its product range to include watches and established itself as a luxury brand representing Japan.
The Tasaki case is a model example of corporate value enhancement through innovation pursued by MBK Partners. Although profitability was only at the level of long-term savings, reviving a company on the brink of bankruptcy and growing it into a global brand was sufficient to earn the evaluation of being ‘the right entity for enhancing corporate value.’ However, prior market events have raised doubts about MBK Partners’ previous actions. This refers to the management rights dispute last year involving Hankook & Company (000240), Korea’s top tire manufacturer.
The dispute arose when Honorary Chairman Cho Yang-rae sold his entire 23.59% stake in Hankook & Company to his second son, President Cho Hyun-beom, through a block deal (after-hours bulk trading).
The eldest son, Cho Hyun-sik, advisor to Hankook & Company, opposed Chairman Cho’s decision and, on December 4, 2023, joined hands with MBK Partners to announce a tender offer for shares of the group’s holding company, Hankook & Company. At that time, MBK Partners offered 20,000 KRW per share as the tender offer price.
However, on the next day, December 5th, Hankook & Company’s stock price closed at 21,850 KRW, a 29.90% increase from the previous day, signaling a red light for the management takeover. MBK Partners raised the tender offer price to 24,000 KRW in a counterattack but failed to reverse the trend. Only 8.83% of shares were tendered, less than half of the minimum target stake of 20.35%.
The issue lies in justification and legitimacy. MBK Partners appeared to have joined hands with one family member (the eldest son) to oust the existing owner (the second son). In chaebol sibling disputes, it is difficult for any side to secure legitimacy. Ultimately, whether in terms of money or justification, it was insufficient to move investors, leaving the impression that even the top private equity fund’s strategy was not perfect.
Furthermore, reports by some media that over half of the funds used for the acquisition were foreign capital diluted MBK Partners’ publicly stated justification of enhancing company value. This is because a significant portion of the profits MBK would have gained from selling shares after a successful tender offer would have flowed overseas.
Analysis suggests that the difficulties MBK Partners faces in corporate acquisitions stem from the limits of its cost-cutting-based corporate value enhancement strategy. In the current situation where corporate technological advancement is intensifying, private equity funds like MBK Partners realistically have limitations in understanding industries and conceptualizing corporate operations.
In reality, MBK Partners acquired the machine tool business division of Doosan Infracore when the Doosan Group faced financial difficulties in 2016, changing its name to Doosan Machine Tools. However, it failed to achieve significant improvements. Operating profit continued to decline for two consecutive years after 2018, and in 2020, sales were 1.221 trillion KRW and operating profit was 102.2 billion KRW, representing a 16.3% decrease in sales and a 42.5% decrease in operating profit compared to the previous year.
For MBK Partners, it wasn’t a loss as a significant portion of the investment was recovered through dividends and recapitalization (recap), but there were clear limits to the operational improvements a private equity fund could achieve in the machine tool industry. Ultimately, it was only after Doosan Machine Tools was acquired by the automotive parts company DN Automotive that full-fledged operational normalization began. The production domain expanded into areas with growing demand like electric vehicles and semiconductors, and technological advancements, such as introducing AI technology, were made.
Park Yong-rin, a research fellow at the Capital Market Institute, pointed out the current limitations of the domestic private equity fund business model and predicted a gradual restructuring of business areas in the future. While traditional industries guarantee stable cash flow, allowing corporate value enhancement through cost reduction alone, this is not the case for high-tech companies that are currently attracting market interest.
