Firms battle it out for Homeplus bid

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Firms battle it out for Homeplus bid

Leading private equity firms have formed three separate teams to participate in the bidding to buy Homeplus, the country’s second-largest supermarket chain, in a deal that could fetch around $6 billion.

The deadline for one of the biggest deals in Asia closed on Monday.

Affinity Equity Partners teamed up with U.S. private equity firm KKR, while Carlyle Group joined with Singapore’s GIC, according to sources.

The KKR-Affinity consortium has experience with massive business deals in Korea, having acquired Oriental Brewery in 2009.

MBK Partners will be preparing an offer with Korea’s National Pension Service after Goldman Sachs Principal Investment Area withdrew from the bidding, defying a speculation that it would pair with MBK.

Local retailers held off, though Orion and Hyundai Department Store are cited to be interested in the deal.

A preferred bidder will be chosen in September and the deal may be completed by the end of this year.

Tesco is working with advisers like HSBC and international law firm Freshfields to pick a buyer.

Even though bidders are gathering, it doesn’t mean the deal will go smoothly.

One of the stickiest issues is the selling price.

Multiple media outlets reported that Tesco and HSBC set the lower limit at 6.7 trillion won ($5.6 billion), a valuation some see as overestimated.

For example, E-Mart, the country’s top supermarket chain that has sizable stakes in Starbucks Korea and Shinsegae’s Chosun Hotel, has a market cap of 6.5 trillion won.

Some analysts say Tesco might let the bidders compete again to lower prices.

Others also predict that the retail giant might sell off Homeplus in pieces if it doesn’t succeed in selling off the unit as a whole.

Homeplus consists of two divisions - Homeplus and Homever. Homeplus operates 117 stores, while Homever runs 33 supermarkets.

Tesco seeks to streamline its business and improve balance sheets by selling Homeplus.

The U.K. chain has suffered significant losses for years because of sharply declining sales at home and abroad.

It posted a record loss in the first quarter this year, and recently closed Homeplus discount stores on its home turf.

Earlier this year, the U.K. retailer notified 2,000 members of its headquarters office staff that they would lose their jobs to restructuring.

The announcement came as Tesco planned to reduce head office costs by 30 percent.

Homeplus, the second-largest supermarket chain in Korea, also faces stiff competition with local rivals.

Former and current executives of Homeplus were slapped with travel bans and investigated last year over allegations that personal information collected during in-store prize giveaways was sold to insurance companies.

The revelation dealt a further blow to the chain that is already beset by strained relations with its union, slumping sales and a separate scandal surrounding a giveaway event.


BY PARK EUN-JEE [park.eunjee@joongang.co.kr]

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