MBK Partners ends bid for Hi-Mart

MBK Partners, a preferred bidder for Hi-Mart, dropped its bid yesterday as shareholders who hold a controlling stake in Korea’s top home appliance retailer refused to extend exclusive negotiations with it, reopening the door to rival Lotte Shopping.

Just last week, MBK was picked as the prime bidder for the 65.25 percent stake, collectively owned by Hi-Mart Chairman Sun Jong-koo, Eugene Group and Hi Consortium, beating out Lotte Shopping, Hi-Mart officials said.

The leading Hi-Mart underwriter, Citigroup Global Markets, denied MBK’s request to extend the exclusive negotiation period, which ended on Monday, by two more weeks.

Korean media reports said MBK and Hi-Mart had been struggling to narrow their differences over the price, and in the process, Hi-Mart grew skeptical about the local equity fund’s ability to raise funds. MBK also cast doubt on Hi-Mart’s future profitability and growth potential.

The combined stake of 65.25 percent was worth 744.6 billion won ($650 million) when the market closed on Monday, the day it was put up for sale.

Market observers said that even though MBK had offered as much as 1.25 trillion won for the stake, retailer Lotte was seen as a better fit.

MBK initially offered more than 80,000 won per share for Hi-Mart, but the company’s stock price fell 21 percent after the bidding closed on June 20 on disappointment that Lotte was not picked as the prime bidder and its weak earnings. It closed at 48,350 won on Monday.

Hi-Mart’s major shareholders, including Eugene Group, are expected to turn to other bidders, although no specific bidder has been named.

MBK’s bid would have made one of Asia’s top three private equity deals this year.

By Kim Jung-yoon[kjy@joongang.co.kr]