Coupang, AliExpress decline to buy Homeplus Express

Industry

Published: 15 Jul. 2024, 19:19

Coupang, AliExpress decline to buy Homeplus Express

A Homeplus Express store in Seongnam, Gyeonggi [HOMEPLUS]

The supermarket chain Homeplus Express, potentially worth up to 1 trillion won ($724 million), has been put up for sale, but oft-cited potential buyers — from Coupang to AliExpress — all denied reported interest in purchasing the asset. The downbeat response is the result of a slump in the retail industry in addition to a fierce opposition from its labor union.

Homeplus Express stores are smaller in size than Homeplus stores and primarily serve neighborhoods.

MBK Partners, Korea’s top private equity firm that wholly owns the unit and hypermarket chain Homeplus, appointed Morgan Stanley to oversee the sale of Homeplus Express back in June, with financial industry insiders suggesting the investment bank would reach out to approximately 10 major domestic and international retail companies and e-commerce platforms.

Homeplus Express maintains a market share of more than 20 percent in a sector that includes retail players including GS The Fresh, Emart Everyday and Lotte Super. The firm is valued for its strength in quick commerce, as it owns two cold storage distribution centers in Gyeonggi. Nevertheless, MBK Partners appears to be having increasing difficulty finding buyers.

NongHyup Financial Group was the latest company to deny its intention to acquire Homeplus Express after reports earlier this month claimed that a Seoul-based branch of the bank had decided to purchase several of the supermarket's locations. Coupang and AliExpress Korea also denied reports that they were considering a similar acquisition in June.

Homeplus Express, per investment insiders, is valued between 800 billion won and one trillion won. Firms appear unwilling to fork over that cash with the retail industry suffering continued downturn in the face of economic recession and decreased consumer spending.

The retail industry is largely focusing on slimming down its organization, offering voluntary resignations and cleaning up unprofitable businesses rather than acquisitions. Oasis, operator of the grocery-focused online mall, recently failed to reach an agreement during an attempt to acquire e-commerce site 11Street.

Organized resistance from employees is also an obstacle. Homeplus’s union plans to hold a resolution rally outside MBK's office in Jongno District, central Seoul, opposing the sale of Homeplus Express.

“Homeplus will lose its competitiveness if they only split out the supermarket business,” the union told the JoongAng Ilbo, an affiliate of the Korea JoongAng Daily.

“We are recording a net loss despite making operational profit because we are still paying the debt that MBK took on when it acquired [Homeplus],” the union said.

MBK Partners acquired a 100 percent stake in Homeplus for 7.2 trillion won, including 4.3 trillion won in loans, from British retailer Tesco.

Homeplus refuted the union’s claim, saying that the company’s business capability and financial structure would “innovatively improve,” and the company’s value would be reconsidered, in the event of a sale.

“We plan to use the sale price to improve the company’s competitiveness with employment stability as a prerequisite,” the firm said.

“It is not for the divestment of [MBK Partners].”

Homeplus recorded 199.4 billion won in operating loss last year, narrowing the size of that loss compared to 2022. Net loss increased between 2022 and 2023.

BY KIM KYUNG-MI [cho.yongjun1@joongang.co.kr