New Kids On, a corporation specializing in children’s clothing and cosmetics, will enter the KOSDAQ market on the 9th through cross-listing. This merger is the second reverse listing hosted by KB Securities this year.
New Kids On is the leading company in the domestic e-commerce children’s fashion market. It is expected to benefit from the trend of ‘Gold Kids’, meaning ‘raising my one and only child like gold’. However, the sluggish stock price trends of similar companies already listed on the domestic market could be a burden for New Kids On.
According to investment banking (IB) industry on the 7th, New Kids On will be listed on the 9th through a merger with KB Securities' KB No.28 Special Purpose Acquisition Company. The merger was approved at a special shareholders' meeting last month, and the merger date is June 24.
Established in 2013, New Kids On is a company that owns over 10 children’s brands including ‘JELISPOON’, ‘milkmile’, and ‘mollimelli’. In 2021, it also launched the vegan cosmetics brand ‘Orgabon’ through its subsidiary, Eco Derma Lab. Last year, the consolidated revenue and operating profit were 50.4 billion won and 4.5 billion won, respectively.
The merger ratio between New Kids On and the SPAC is 1 to 0.1832341. This structure delivers 0.1832341 shares of New Kids On common stock for each share of SPAC common stock. After the merger, the total number of issued shares will be about 8 million, with an estimated market capitalization of approximately 86.2 billion won. The merger price is 10,915 won.
The merger price of New Kids On was determined solely based on intrinsic value, based on asset value and revenue value. It is the weighted arithmetic average of asset value and revenue value at a ratio of 1 to 1.5.
Conversely, relative value was excluded as the company explained that there are fewer than three listed companies that meet the criteria for selecting comparable companies. TOEBOX KOREA and HANSAE MK made it to the final candidate list of comparable companies but were excluded because of significant differences in corporate tax-adjusted continuing project income per share and net asset per share.
Through this reverse listing, New Kids On will receive a total of 11.5 billion won in public offering funds. The company plans to use these funds for launching a new brand for children’s products, converting its own mall ‘Newkiki’ into a global platform, marketing, and constructing a logistics center. New Kids On has set a goal to raise the proportion of overseas sales to 90% within the next decade.
New Kids On presents over 2,500 new styles annually through global character intellectual property (IP) such as Care Bears, Disney, Sanrio, and Esther Bunny. It is also active on major e-commerce platforms such as Coupang, Naver, and Musinsa.
Another strength of New Kids On is its system, which performs everything from yarn purchasing to knitting, dyeing, and printing in Korea, before producing finished goods overseas. Through this system, it has reduced fabric distribution costs by 15 to 20% and lowered the cost of sales ratio from 53.3% in 2018 to 45.8% this year, the company explained.
However, the sluggish stock price trends of similar corporations are expected to pose a challenge for New Kids On as well.
So far this year, AGABANG&COMPANY’s stock price has risen by about 4%. It reached a peak in the 8,200 won range in mid-April but has since fallen back to the 5,000 won range. HANSAE MK has decreased by 2% compared to the beginning of the year, while TOEBOX KOREA has fallen by approximately 17%.