A Homeplus Express store in Seoul
MBK Partners’ planned sale of Homeplus Express, the supermarket chain of South Korean hypermarket operator Homeplus, has hit a snag as potential buyers are increasingly losing their interest in the company over valuation differences.
The South Korean private equity firm put Homeplus Express up for sale in June, attracting several retail companies.
Among those interested were Chinese e-commerce giant Alibaba Group Holding Ltd., GS Retail Co. and BGF Retail Co.
Industry sources, however, said on Friday that all of them have put on hold their bids to acquire Homeplus Express over differences in its valuation.
“It’s been almost three months since Homeplus Express was up for sale but due diligence on Homeplus Express has made little progress,” said one of the retail companies with intent to buy it.
In June, MBK Partners picked Morgan Stanley as the sales manager of Homeplus Express as part of ongoing efforts to improve Homeplus’ financial health ahead of its eventual exit.
MBK Partners’ office in Seoul
The seller is reportedly sent a teaser about the Homeplus Express sale to about 10 potential buyers such as retailers, e-commerce operators and online platforms at home and abroad.
Established in 2004, Homeplus Express is one of the big four supermarket chain operators in Korea, along with GS Retail’s GS The Fresh, E-Mart Inc.’s E-Mart Everyday and Lotte Shopping Co.’s Lotte Super.
VALUATION GAP
Morgan Stanley is said to have estimated unlisted Homeplus Express’ 2023 earnings before interest, taxes, depreciation, and amortization (EBITDA) at 100 billion won ($72.5 million).
MBK and Morgan Stanley reportedly hope to receive 600 billion-800 billion won in proceeds from the sale, amounting to six to eight times the 2023 Homeplus Express EBITDA.
But potential buyers estimate Homeplus Express’ value at 300 billion-400 billion won, sources said.
“The seller presented the expected annual growth rate of Homeplus Express’ quick commerce service at 58%, but we are not convinced,” said one of the potential buyers.
Homeplus Express was a leader in quick commerce, which delivers goods ordered online via a motorbike but has recently been losing ground to rivals such as E-Mart Everyday and GS The Fresh, readily available on food delivery app Baedal Minjok, or Baemin for short.
MBK acquired 100% of HomePlus for 7.2 trillion won ($6.6 billion) in 2015
Homeplus Express operates a one-hour delivery service from the time of ordering, utilizing offline stores to take advantage of the rapid growth in available groceries, including fresh foods.
“Homeplus Express’ offline stores are also aging, meaning most of them require large-scale investments to renovate,” said another potential buyer.
Homeplus Express runs 235 stores, about 75% of its total 315 branches nationwide, in key commercial and residential areas in Seoul and surrounding regions.
LABOR ISSUE
Labor issues are also complicating MBK’s sale of Homeplus Express.
Last week, unionized workers of Homeplus, which belongs to Korea’s Mart Industry Labor Union, held a rally, with around 1,000 members participating, to protest the sale of Homeplus Express.
Potential buyers demand Morgan Stanley to provide a clear-cut plan to address union-related risks.
In 2015, MBK acquired 100% of Homeplus for 7.2 trillion won from British retailer Tesco Plc, in its biggest-ever acquisition and the then-largest buyout transaction in Asia.
By Jae-Kwang Ahn
ahnjk@hankyung.com
In-Soo Nam edited this article.
