E-Land sells Modern House to MBK Partners

Retail giant E-Land Group said Sunday it sold Modern House, its household and consumer goods unit, to MBK Partners, Korea’s biggest private equity fund, for 700 billion won ($621 million).

It was the second big recent deal for E-Land following its sale of apparel brand Teenie Weenie to Chinese fashion company V-Grass for 877 billion won in January. The deals are expected to reduce retail conglomerate’s sky-high debt.

“The decision to sell [Modern House] is the result of our need to improve our financial structure and MBK partner’s search for a complement to its retail business,” said E-Land in a statement.

Modern House runs 63 branches nationwide and posted 300 billion won in annual revenue last year. MBK Partners has received permission from E-Land to keep Modern House stores in their current locations for a decade, including in buildings and retailers owned by the retail group.

MBK has been operating the Homeplus discount chain since 2015. Modern House branches are expected to complement that retail business.

The 700 billion won E-Land is getting from the sale is equivalent to its annual earnings before interest, taxes, depreciation and amortization, and its debt-to-equity ratio is expected to drop to 200 percent by July, when the sale will be finalized.

In a related move, the group earlier this month decided to sell a 69 percent stake in E-Land Retail for 600 billion won to a consortium of private equity firms including Curious Partners. At the end of last year, E-Land’s debt-to-equity ratio was 315 percent.

E-Land initially tried to sell a restaurant business under its E-Land Park subsidiary that has 18 brands and 559 locations around the country to MBK Partners but that fell through. The group said it would retain the restaurant arm, which owns such popular buffet franchises as Ashley and Jayeon Byeolgok for the time being, based on the belief that its key business in fashion retail could create synergy with the restaurant business.

“A lot of bidders show interest in our restaurant business but we have diverted our attention to upgrading its value rather selling it off,” said an E-Land spokesman.

The conglomerate also said on Sunday it would proceed with a plan to convert E-Land World, which controls other subsidiaries such as E-Land Retail and E-Land Park into a holding company and to list fashion subsidiary E-Land Retail next year, which it decided last month to delay.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]