【Gong Cha Sale】U.S. private equity fund reportedly plans to sell Gong Cha, with a 7-year stake valuation nearly six times higher

Reuters citing sources revealed that bubble tea chain brand Gong Cha has attracted potential buyers including U.S. private equity firm Bain Capital and Transatlantic Investment Group (General Atlantic). The seller, TA Associates, expects the transaction amount to reach up to $2 billion (approximately HKD 15.6 billion).

Sources said that Boston-based private equity fund TA Associates has hired JPMorgan (U.S.: JPM) to handle the sale, and expects to receive binding offers by mid-June. The sources also indicated that Gong Cha’s EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) exceeds $70 million annually.

A $2 billion valuation implies a core profit multiple of nearly 30 times. The sources said buyers tend to propose lower multiple offers.

Gong Cha was founded in Taiwan in 2006 and has now become one of the largest tea brands globally, with nearly 2,200 stores across 32 markets through direct-operated and franchised outlets. According to its website, the brand sells milk tea, fruit tea, and other cold drinks through stores located in Asia, North America, Europe, and the Middle East. Benefiting from growth in the Japanese and South Korean markets, the group’s revenue grew 14% last year to about $220 million.

Last year, Gong Cha entered five new markets including Thailand, Colombia, and Ecuador, and completed strategic acquisitions of major master franchisees on the East and West Coasts of the United States.

TA Associates’ website shows that this growth-focused private equity buyout fund invested in Gong Cha in 2019. Records indicate that TA Associates acquired all shares of Gong Cha from Unison Capital in 2019 for approximately 3.5 trillion Korean won ($288 million, about HKD 2.25 billion).