This article was published on March 31, 2025, at 4:58 p.m. on the ChosunBiz MoneyMove site.
Private equity fund operator Wel2C Investment is seeking to acquire control of cosmetics manufacturer Encos. Initially, Encos' major shareholder planned to welcome a new second-largest shareholder and go public, but with the emergence of an acquisition candidate, they have shifted to selling management rights.
The sale targets approximately 30% of Encos' shares, excluding the major shareholder's 30%, and about 37% of the equity held by financial investors. The overall corporate value is reported to be set in the mid-200 billion won range.
Among financial investors, Praxis, which holds the highest equity stake, had engaged in legal disputes with Encos over early repayment conditions until last year. If the company is recognized with a corporate value in the mid-200 billion won range and sold to Wel2C, it is expected to achieve an internal rate of return (IRR) of over 8%, realizing the returns of an 8-year investment.
According to investment banking (IB) industry sources on the 31st, Wel2C is negotiating on price and other terms to acquire management rights of Encos using the second blind fund it recently established.
An IB industry official noted, “Currently, only an MOU has been signed, and due diligence started today (31st),” adding, “I understand that nothing has been finalized yet.”
Encos is a cosmetics OEM and ODM company established in 2009. More than 60% of its sales last year came from the skincare sector, and it is known for its capabilities in manufacturing hydrogel mask packs.
Currently, the largest shareholder of Encos is CEO Hong Seong-hoon, who holds a 61.02% equity stake. The second-largest shareholder is Praxis Capital (21.54%), with Timefolio Asset Management (9.9%) and LLH Partners (5.16%) also holding equity.
It is reported that both parties are negotiating to determine the overall corporate value in the mid-200 billion won range. This is 80% higher than the valuation (140 billion won) when Praxis invested in 2018.
This sale of management rights stems from Praxis' repayment demands. Praxis invested 30 billion won in Encos in the form of redeemable convertible preferred shares (RCPS) in 2018. After Encos failed to go public by the promised date, Praxis requested early repayment, and both sides reportedly engaged in legal disputes for about two and a half years over the interest rate. Encos stated they would repay with a 6% compound interest as agreed, but Praxis insisted that penalty interest for the breach of contract should also be paid.
Ultimately, the exact figure for the interest rate set by the court has not been disclosed, but it is said to be determined at a mid-level of the rates claimed by both parties. The market estimates it to be around 8%.
Encos repaid 10 billion won to Praxis last year, and the remaining amount must be repaid within this year. Additionally, Encos is reportedly looking to raise capacity (CAPA) due to recent strong performance, contemplating listing or selling management rights through pre-IPO investments.
An IB industry official stated, “From Praxis's perspective, whether they receive repayment or sell management rights, the annual IRR is similar at 8-10%.” If Encos is sold for a corporate value of 250 billion won, Praxis is expected to record an IRR of over 8%.