When the child outgrows the parent: How Olive Young's rise complicates CJ's succession plan

Foreign tourists look around an Olive Young store in Myeongdong, central Seoul in December 2023. [CJ OLIVE YOUNG]

 
[EXPLAINER] 
 
CJ Olive Young, the health-and-beauty retailer whose bright-green storefronts line virtually every shopping district in Korea, has seen its sales and profit grow nearly sixfold in under a decade, riding on the K-beauty boom across different parts of the world. 
 
The appeal of the beauty retailer's future business prospects lies in its outsize exposure to foreign customers both on- and offline, allowing it to grow beyond the constraints facing most Korea-focused retailers.
 

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Here is the unusual part: Olive Young is still not publicly listed, despite its annual sales topping 5.8 trillion won ($3.93 billion), yet analysts value it at as much as 10.4 trillion won. CJ Corporation, the listed holding company that owns 51.2 percent of Olive Young, has a market capitalization of roughly 6.8 trillion won. Daishin Securities estimates that CJ's stake in Olive Young alone is worth around 6.5 trillion won, nearly equal to the parent company's entire market value.
 
That gap is at the heart of what analysts expect to be the most significant corporate restructuring in Korea since the 2015 merger of Samsung C&T and Cheil Industries, a deal widely seen as a maneuver to consolidate the Samsung founding family's control over the group, and one that sparked a national scandal over minority shareholder rights.

 
A similar succession dynamic is at work here. CJ Group's chairman, Lee Jay-hyun, is trying to secure control over the conglomerate for his eldest son, Lee Sun-ho. How CJ structures the next move will test the country's newly tightened governance rules, set a precedent for conglomerate succession and signal to global investors whether Korea's push to end the “Korea discount” is more than talk.
 

[DAISHIN SECURITIES RESEARCH CENTER]

Hold on, how is a beauty chain worth more than an entire conglomerate?
 
Olive Young did not start out as a juggernaut. When it opened its first store in Seoul's Sinsa-dong neighborhood in 1999, the health-and-beauty format was untested in Korea. The chain lost money for its first decade. Growth came gradually, in phases.
 
However, in the 2010s, Olive Young carved out a niche by curating emerging indie beauty brands and expanding aggressively across the country, going from around 90 stores in 2010 to over 1,000 by 2017. In the process, the firm not only sold existing brands but also created new beauty categories, set trends and nurtured its own portfolio of brands.
 
Along the way, many local competitors, including Watsons Korea, Lalavla and LOHB's, pulled out of the market by 2022, giving Olive Young further dominance. Foreign competitors Sephora and Boots also eventually ceded ground the Korean cosmetic giant. During the pandemic, the company pivoted hard into e-commerce, launching same-day delivery nationwide and pushing its online sales share above 25 percent.
 
Then came the K-beauty tourism boom. Foreign visitors discovered Olive Young as a one-stop shop for Korean skincare, and by 2025, they accounted for 28 percent of in-store revenue. In Olive Young's Myeongdong Town branch, foreign customers make up as much as 95 percent of sales.

 
On top of that, Olive Young is opening four U.S. stores in California this year, with a dedicated e-commerce site and a logistics hub in Bloomington. If its U.S. bet pays off, the company's price tag will climb further.
 
Meanwhile, CJ Group's other flagships are struggling. CJ CheilJedang, its food and biotech arm, posted its first-ever net loss in 2025 while its entertainment and movie theater affiliates — CJ ENM and CGV — have also experienced stagnant growth. 
 
Against that backdrop, Olive Young is not just CJ's brightest performer; it is increasingly the conglomerate's center of gravity. Daishin Securities estimates that Olive Young accounts for nearly 60 percent of CJ Corporation's total net asset value.
 

Olive Young's first North American distribution center in Bloomington, California [OLIVE YOUNG]

So why not just hold an IPO? What's the delay?
 
A merger with CJ Corporation is now seen by market analysts as the most likely case. However, an initial public offering (IPO) was the original plan: In 2021, CJ hired Mirae Asset Securities and Morgan Stanley for a listing at around 4 trillion won. But today, just five years later, this idea looks dead.
 
Two things killed it. First, Korea is cracking down on “dual listings,” cases where a parent floats a subsidiary that is already embedded in its own share price. The Korea Exchange is finalizing guidelines this year, and given its heavy weighting in CJ Group's books, Olive Young would be a textbook case. 
 
Second, Olive Young canceled all employee stock options in February 2025, which is the kind of perk companies hand out before an IPO to keep talent. Scrapping these, even at the risk of losing staff, was widely read as proof that a listing is now off the table. 
 
The trade-off with the new plan is that a merger, unlike an IPO, brings no fresh outside capital into the company, just as Olive Young is gearing up for a costly push into the U.S. market.
 
The market is fully betting on the merger. When a merger report surfaced in September 2025, CJ Corporation's stock surged as much as 10 percent on intraday trading and hit a 52-week high, even after the denial.
 
Chairman Lee Jay-hyun visited the Olive Young Central Myeongdong Town store in central Seoul on March 26 to inspect operations, a move that some interpreted as leaning toward support for the merger. Chairman Lee emphasized the need to “put together a K-beauty ecosystem in the United States” during the inspection. 
 
Several brokerages now treat the merger as all but certain, with price targets as high as 215,500 won as of Thursday morning. 
 

Lee Jay-hyun, second from left, chairman of CJ Group, visits the Olive Young Central Myeongdong Town store in Jung District, central Seoul, to inspect operations on March 26. [CJ]

Who comes out ahead if this actually happens?
 
CJ Group Chairman Lee is preparing to hand the conglomerate to his children. Lee Sun-ho, the presumed heir, holds just 3.2 percent of CJ Corporation but 11.04 percent of Olive Young. His sister, Lee Kyung-hoo, holds another 4.21 percent. 
 
In a merger, Olive Young shareholders would swap their shares for CJ Corporation shares based on relative valuations. Because Olive Young is so valuable and the Lee siblings own so much of it, a merger would significantly boost their control over the entire group. 
 
Industry watchers have called this a “shortcut to succession,” a playbook used by Samsung and SK in 2015.
 
The sensitive variable is the merger ratio. The higher Olive Young is valued, the more shares the Lee siblings receive. But Olive Young is unlisted, so there is no stock price to anchor the math. Outside appraisers must set the number, and the process leaves plenty of room for judgment and interpretation. 
 
“What stands out is that CJ Corporation's effective stake in Olive Young, measured by voting rights, has risen from 51.2 percent to 66.1 percent,” said Lee Kyung-yeon, an analyst at Daishin Securities. “This means the holding company's real control over its key subsidiary, and the share of value attributed to it, has expanded.”
 
CJ Corporation's second-largest shareholder is the National Pension Service, which holds 13.4 percent. If the merger ratio tips toward Olive Young, then Korean pensioners' holdings will shrink.
 

An Olive Young branch in central Seoul is seen in this file photo. [JOONGANG ILBO]

What does any of this have to do with the 'Korea discount'?
 
Korean stocks have long traded at a discount to comparable companies elsewhere, a phenomenon referred to as the “Korea discount.” Investors pin much of the blame for the gap between price and value on a longstanding pattern in which conglomerate founding families restructure their groups in ways that benefit themselves, at the expense of minority shareholders. The government has for years been trying to break that pattern.

 
Between July 2025 and February 2026, Korea's National Assembly passed three rounds of amendments to the Commercial Act aimed at protecting ordinary investors.
 
One key change is the crackdown on dual listings. If a conglomerate lists a subsidiary whose value is already embedded in the parent's share price, they effectively make retail investors pay twice for the same asset. That rule is what closed the IPO path for Olive Young. 
 
Another amendment forces companies to cancel treasury shares on a fixed schedule. Olive Young holds 22.6 percent of its own shares as treasury stock; CJ Corporation holds 7.3 percent. Once canceled, every remaining shareholder's percentage stake goes up, so whether cancellation happens before or after a merger changes the final ownership math considerably.
 
President Lee Jae Myung has pitched the overhaul of the Commercial Act as a head-on attack on the Korea discount. The Kospi has roughly doubled in the past year, and analysts credit part of the rally to reform momentum. The CJ-Olive Young merger will be the first real test of whether these new rules have teeth.
 
“We expect CJ Olive Young’s value to be fully reflected into CJ Corporation’s share price,” said Lee Seung-woong, an analyst at Yuanta Securities. “With the government’s recent push to restrict dual listings, the company, which holds a blue-chip unlisted subsidiary, is expected to benefit.”

BY KIM MIN-YOUNG [kim.minyoung5@joongang.co.kr]