A group led by MBK Partners is nearing an agreement to buy Tesco’s South Korean business for about $6 billion including debt, in what could be the country’s biggest private-equity deal, people with knowledge of the matter said.
The group, which includes South Korea’s National Pension Service, recently clinched exclusive negotiating rights to purchase Tesco’s Homeplus business, according to one of the people. The MBK consortium has secured financing for the purchase, the person said, asking not to be identified as the information is private.
MBK, North Asia’s biggest independent buyout firm, beat a rival consortium led by KKR & Co., the people said. Executives from Tesco and MBK are in Hong Kong to finalise details of an agreement, one person said.
Completing the deal would give the MBK-led group a discount-store chain that is second only to E-Mart Co. in South Korea, with more than 900 stores generating annual revenue of over $7 billion. Aside from joining Wal-Mart Stores among global retailers pulling out of the country, selling the company’s biggest overseas business would provide UK-based Tesco with much-needed funds to pay off debt.
The South Korean business is Tesco’s crown jewel in Asia, with a valuation of £4 billion, trumping the £1.6 billion at which Dunnhumby is valued, according to Credit Suisse Group AG estimates in July. Still, Homeplus swung to a net loss of 300.1 billion won ($255 million) in the year ended 28 February from a profit a year earlier, while revenue shrank 4 per cent to 8.6 trillion won amid weak household spending.
South Korean market leader E-Mart, part of the family-run Shinsegae Group, estimates that it had 29 per cent of the market last year, followed by Homeplus’s 25 per cent and Lotte Mart’s 16 per cent.
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