MBK Partners Ltd.is nearing an agreement to buy Tesco Plc’s South Korea 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. Another person, while not confirming the exact amount, said MBK’s bid price had gone “higher than expected” as the bidding process continued.
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Tesco received three individually binding bids for the South Korean unit in August, called Homeplus, valued at around $6bn (£3.9bn). However, they have had an uneven relationship with the country, where strong unions and government hostility have often made turning successful deals into profitable exits hard.
Homeplus and MBK declined to comment when contacted by Reuters, as did Carlyle, KKR and NPS.
Touted to be South Korea’s biggest private-equity deal, it would help Tesco shed a few global operations after a chain of blunders committed at its UK supermarkets which include accounts misappropriation, huge write-downs, and disturbances in management ranks.
Tesco in April reported a pretax loss of £ 6.38 billion for the year as it logged a massive property write down, and the company also reported net debt of £ 8.5 billion.
The group, which has dominated the British retail landscape for decades, has paid the price for getting distracted by an expensive overseas expansion and failing to spot changing shopping habits at home, as well as the threat from discounters. Since then, it has been seeking to divest its businesses.
The deal will be among the largest transactions in Asia this year and will allow the MBK-led group to enter South Korea’s highly competitive retail sector.
The business has a valuation of 4 billion pounds, more than the 1.6 billion-pound valuation of Dunnhumby, a U.K customer science company owned by Tesco. The Bloomberg report added that Tesco is also looking at options to sell its analytics business, Dunnhumby.
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Homeplus relied on hypermarkets for more than 80 percent of its 2014 revenue of 7.05 trillion won, and has booked at least two straight years of declines in same-store sales.
