KKR Initiates Investment in the Growing Realm of South Korean Skincare and Cosmetics
In a significant move, US asset manager KKR has announced its entry into the Korean cosmetics sector with the acquisition of cosmetics packaging company Samhwa. The deal, valued at 733 billion won ($527 million), marks KKR's first investment in the domestic cosmetics sector.
Founded in 1977, Samhwa is a leading supplier of cosmetic packaging, providing solutions to over 300 brands globally. The company, recognized for its airtight cushion packaging, a key technology in Korean cushion foundation compacts, is considered to be at the heart of the K-beauty ecosystem.
Previously owned by US-based private equity fund TPG, Samhwa will use KKR's global network to expand ties with leading luxury cosmetics brands, such as L'Oreal, Estee Lauder, Chanel, and LVMH. This acquisition is assumed to be a bet on the Korean manufacturer's ability to stably supply its products to a wide range of brands.
The burgeoning Korean cosmetics sector has caught the eye of other industry heavyweights. Bain Capital, for instance, invested about 670 billion won to acquire a 60 percent stake in Classys, a maker of skin treatment devices, in 2022. US asset manager Blackstone has also agreed to make an investment in Juno, a Korean premium hair salon chain, without disclosing the financial terms of the deal.
The growing interest in the Korean cosmetics sector is not surprising. Korean cosmetics exports in the first half of 2021 reached an all-time high of $5.5 billion. Some investors are also considering aesthetic medical device companies as an extension of the K-beauty trend.
However, big-name private equity funds are often reluctant to invest in consumer goods due to rapidly changing trends. But KKR's investment in a manufacturer capable of weathering market fluctuations in the beauty sector demonstrates their confidence in Samhwa's resilience.
In 2020, Samhwa posted consolidated sales of 186.8 billion won with an operating profit of 31.4 billion won. With KKR's backing, the company is poised to continue its growth and contribute to the ongoing success of the K-beauty industry.
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