H&Q Equity Partners, a subsidiary of South Korean private equity firm H&Q Korea, will complete due diligence on FG Korea, the operator of Five Guys in South Korea, by mid-August and reassess the company's valuation based on first-half 2025 performance. The move aims to finalize acquisition terms with Hanwha Galleria, including transaction price and key contract conditions, after prolonged sale negotiations. FG Korea's profitability declined sharply in 2024, with operating profit falling 69.8% year-over-year to 1.02 billion KRW despite revenue growth of 15.7% to 53.84 billion KRW, making the upcoming half-year results a critical factor in price negotiations.
H&Q Equity Partners Targets August SPA Signing After Mid-August Due Diligence Completion
H&Q Equity Partners plans to finish remaining due diligence on FG Korea by mid-August. Following the completion, both parties will discuss key transaction terms including overall enterprise value, final transaction price, contract relationship with US Five Guys headquarters, and future store expansion plans based on due diligence results and first-half 2025 performance. The market previously discussed a transaction price range of 60 billion to 70 billion KRW for FG Korea, though Hanwha Galleria maintained that specific sale amount and conditions have not been finalized. Hanwha Galleria reportedly invested approximately 20 billion KRW when introducing Five Guys to South Korea. Both parties aim to finalize enterprise value and final transaction price and sign a stock purchase agreement (SPA) within August based on due diligence findings.
FG Korea 2024 Operating Profit Declined 69.8% Despite Revenue Growth
FG Korea recorded revenue of 53.84 billion KRW in 2024, growing 15.7% year-over-year, but operating profit decreased from 3.37 billion KRW to 1.02 billion KRW, a 69.8% decline. The operating profit margin fell from 7.3% to 1.9%. The due diligence completion timing coincides with FG Korea's first-half settlement period, meaning first-half 2025 performance will be reflected in enterprise value assessment. Given the consistent profitability slowdown since FG Korea began domestic operations, the first-half 2025 results are drawing market attention as a core criterion for enterprise value reassessment and whether domestic business profitability has recovered.
FG Korea Established Japan Subsidiary in 2024 With 4.92 Billion KRW Investment
FG Korea established a Japan local subsidiary 'FG Japan G.K.' in 2024, securing 100% equity stake with an investment of 4.92 billion KRW. H&Q evaluated the growth potential of the Japan market as well as the domestic business as a key acquisition rationale when selected as preferred bidder. Five Guys is a brand introduced to South Korea through a contract between Hanwha Galleria and the US headquarters, making contract succession and business rights maintenance after management transfer to H&Q Equity Partners a prerequisite for Japan business expansion.
US Five Guys Headquarters Contract Terms Affect Future Cash Flow and Valuation
FG Korea has a development and operation contract with the global headquarters and pays a certain percentage of revenue as royalties. Future cash flow and enterprise value can vary significantly depending on related contract terms, potentially affecting the final transaction price. Hanwha Galleria selected H&Q as the preferred bidder for the sale of 100% of FG Korea shares in December last year. After the priority negotiation period of the existing MOU expired, both parties re-signed a memorandum of understanding (MOU) for equity sale on June 11 and agreed to continue main contract negotiations. FG Korea is a wholly-owned subsidiary of Hanwha Galleria, operating the Five Guys business in South Korea. Five Guys is a brand whose domestic introduction was led by Kim Dong-sun, executive vice president of Hanwha Galleria Future Vision Division and third son of Hanwha Group Chairman Kim Seung-yeon, opening its first store in Gangnam, Seoul in June 2023.
FAQ
When will H&Q Equity Partners complete due diligence on FG Korea?
H&Q Equity Partners plans to finish remaining due diligence on FG Korea by mid-August. Following completion, both parties will discuss key transaction terms based on due diligence results and first-half 2025 performance, aiming to sign a stock purchase agreement within August.
What was FG Korea's financial performance in 2024?
FG Korea recorded revenue of 53.84 billion KRW in 2024, growing 15.7% year-over-year, but operating profit decreased from 3.37 billion KRW to 1.02 billion KRW, a 69.8% decline. The operating profit margin fell from 7.3% to 1.9%.
What is the transaction price range discussed for FG Korea?
The market previously discussed a transaction price range of 60 billion to 70 billion KRW for FG Korea, though Hanwha Galleria maintained that specific sale amount and conditions have not been finalized. Hanwha Galleria reportedly invested approximately 20 billion KRW when introducing Five Guys to South Korea.
