MBK Partners, one of the leading North Asia-focused private equity firms, has come under a probe by South Korea’s National Tax Service (NTS) amid the brewing controversy over MBK’s management of Homeplus Co. and its hostile takeover bid for Korea Zinc Inc.
According to sources in the investment banking industry on Tuesday, the NTS launched an investigation into MBK on the same day.
Considering that the NTS team, currently scrutinizing MBK, has mainly investigated big corporations and high-income earners, the NTS is expected to focus on whether the private equity giant underreported income to reduce taxes.
An MBK official confirmed the NTS probe but said it is a “regular tax audit” five years after the previous “regular” inspection.
In 2020, the NTS investigated Michael ByungJu Kim, MBK co-founder, partner and chairman, into alleged offshore tax evasion for about 100 billion won ($69 million) worth of his income following a series of the private equity firm’s lucrative exits from Coway Co. and Orange Life Insurance Co.
Kim denied any wrongdoing, saying that as a US citizen, he already paid taxes to the US tax office. However, the Korean tax office slammed Kim with approximately 40 billion won in penalties after its investigation.
The auditing comes at a time when MBK is in the limelight following last week’s sudden filing for court-led rehabilitation of Homeplus, a major Korean retail chain, which the private equity giant purchased from British retailer Tesco Plc in 2015 for 7.2 trillion won.
The outcome of this investigation could affect MBK’s other deals under development, such as its bids to take over the world’s top lead and zinc smelter, Korea Zinc, with Young Poong Corp. and control the management of CJ Cheiljedang Corp.’s bio business.
The NTS declined to confirm details regarding its investigation into MBK.
Founded in 2005, MBK is one of Asia’s largest private equity firms, managing assets exceeding $30 billion. Its involvement in high-profile acquisitions, such as the Homeplus deal, has made it a major player in the region’s financial landscape.
By Da Eun Choi
max@hankyung.com
Sookyung Seo edited this article.
