British private equity firm (PEF) CVC Capital, which is in the process of selling its stake in South Korean accommodation platform company Yeogi Eottae, is reportedly considering switching to an initial public offering (IPO).
CVC Capital aims for a corporate valuation of around 1.5 trillion won ($1 billion) for Yeogi Eottae, and if it is challenging to achieve this valuation in the M&A market, pursuing an IPO might be a better option.
According to investment banking (IB) industry insiders, CVC Capital is weighing the IPO option for Yeogi Eottae’s operating entity, ‘Yeogi Eottae Company (formerly With Innovation)’. CVC Capital holds an 80.87% stake in Yeogi Eottae Company through a special purpose company (SPC) named Vacance Company Limited. Financial investors (FIs) own the remaining 19.07%.
CVC Capital is looking to sell Yeogi Eottae Company’s controlling stake, seeking a corporate valuation of $863.4 million to $1 billion Previously, when they received a $35.9 million investment from Mirae Asset Capital in 2022, the company was already valued at $863.4 million.
In Apr., CVC Capital’s sale manager, Bank of America (BofA) Merrill Lynch, distributed teaser letters to American FIs and strategic investors (SIs), but the schedule for preliminary bids has not yet been set.
The IB industry considers it challenging for Yeogi Eottae to achieve the desired valuation. Last year, the company’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), a measure of a company’s overall financial performance, was $34.3 million.
Applying an EV/EBITDA (Enterprise Value to EBITDA) multiple of 17, which is similar to that of Booking Holdings, results in a valuation of around $575.3 million. The EV/EBITDA ratio is used to value a company and compare it to others by showing how many times the EBITDA investors are willing to pay for the enterprise value. Booking Holdings operates platforms like ‘Booking.com’ and ‘Agoda.’ If we use Expedia Group’s valuation (price-to-earnings ratio) of 8.7 times, the valuation drops to $287.7 million.
Alongside this, CVC Capital’s consideration of an IPO is influenced by the actions of competitor Yanolja, which is attempting to go public on the NASDAQ market with a valuation of up to $8.6 trillion. Given this, CVC Capital believes that exploring opportunities in the IPO market might be more advantageous.
