MBK-invested Homeplus looks for new owner as M&A emerges as option

South Korea’s leading hypermarket chain Homeplus Co. is once again up for sale, a decade after private equity firm MBK Partners Ltd. took it private in a landmark leveraged buyout.

Currently under court-supervised restructuring, Homeplus on Thursday announced plans to pursue a pre-packaged M&A deal before finalizing its rehabilitation plan. The decision came after a court-commissioned audit found that its liquidation value exceeds its value as a going concern.

Homeplus submitted a request to the Seoul Bankruptcy Court seeking approval to launch a pre-packaged sale process.

The move follows a report by Samil PwC Accountings, which concluded that the hypermarket operator’s liquidation value stands at 3.7 trillion won ($2.7 billion), significantly higher than its estimated going-concern value of 2.5 trillion won.

The auditors attributed the premium to the company’s sizable property holdings, with total assets estimated at 6.8 trillion won.

The court’s decision on whether to approve the M&A process is expected within a week, factoring in creditor input.

LIQUIDATION LIKELY IF NO BUYER

If approved, the deadline for submitting the rehabilitation plan, initially set for July 10, will be postponed until the M&A is complete, according to Homeplus officials.

If Homeplus fails to find a buyer, however, it will likely face liquidation, effectively ending its two-decade presence in Korea’s retail sector, industry watchers said.

“This scenario is not uncommon for asset-heavy firms like Homeplus,” said Choi Hyo-jong, an attorney at domestic law firm Lin. “When the liquidation value is significantly higher, rehabilitation often becomes difficult to justify.”

In 2015, MBK acquired 100% of Homeplus for 7.2 trillion won ($4.9 billion) from British retailer Tesco Plc, marking what was at the time its largest acquisition and the largest leveraged buyout (LBO) transaction in Asia.

MBK financed the deal with 2.2 trillion won in equity and the remaining 5 trillion won through acquisition financing.

NANVER, HANWHA: POTENTIAL SUITORS

Potential suitors are said to include Naver Corp. and Hanwha Group.

Naver, South Korea’s dominant tech giant, has been aggressively expanding its e-commerce footprint and may see Homeplus’s offline network as a strategic asset.

Hanwha Corp., the flagship unit of Hanwha Group, has been diversifying its retail holdings under Kim Dong-seon, executive vice president of Hanwha Galleria Corp. and Hanwha Hotels & Resorts Co., following acquisitions of retail companies such as Ourhome and Pureplus.

Yet, industry executives are skeptical about the prospects of a full sale of Homeplus.

Shinsegae Inc. and Lotte Shopping Co., Homeplus’ main rivals in the retail sector, are known to have ruled themselves out due to internal restructuring and sluggish consumer demand.

Shinsegae and Lotte groups recently closed underperforming stores and are grappling with mounting losses in their duty-free operations.

PIECEMEAL ASSET SALE

Analysts said a piecemeal asset sale may be more realistic.

Homeplus operates 126 hypermarkets and more than 310 convenience-format Homeplus Express stores across Korea – too many for a single buyer to absorb under current market conditions, analysts said.

“It’s hard to imagine one player taking on the entire portfolio,” said one retail executive. “A partial sale focused on the most profitable stores seems more plausible.”

Chinese e-commerce giants such as AliExpress and Temu are also seen as possible bidders, though their interest remains speculative. Those Chinese firms have ramped up activity in Korea but have yet to make significant offline retail moves.

The fate of Homeplus’s employees and small-scale tenant partners now hinges on the outcome of the sale.

At least 20 leased stores have already received termination notices, raising fears of further closures.

Write to Tae-Ung Bae at btu104@hankyung.com

In-Soo Nam edited this article.