South Korea’s Hi-Mart attracts interest from Tesco – report
Hi-Mart, the South Korean electronics retailer that Affinity Equity Partners exited in 2008, is about to change hands once again, with UK retailer Tesco tipped to bid for the asset. Several South Korean retailers are also said to be interested, as are some private equity firms, although the latter may struggle to finance the deal.
Hi-Mart's three major shareholders, including Eugene Corp, which bought the company from Affinity and Government of Singapore Investment Corp. (GIC), have appointed Citigroup to advise on the sale, Reuters reported. Their combined stake of 57.6% is worth about $900 million, based on Hi-Mart's most recent share price.
Tesco's interest stems from a desire to expand its footprint in Asia. The UK firm, the world's number three retailer by sales, issued its first profit warning in living memory in January amid weak wage growth and government austerity measures in Europe. It already has exposure to South Korea through its subsidiary Homeplus, which saw sales of KRW5.2 trillion ($4.62 billion) from its 125 retail stores and 267 supermarkets in the third quarter of 2011.
Hi-Mart's EBITDA forecast for 2012 is $343 million, according to Thomson Reuters, and based on a typical multiple of 8-9x for retail businesses, the enterprise value would be $3.1 billion.
Affinity and GIC paid $769 million for an 80% stake in the company in 2005, before selling to Eugene for just over $2 billion. A consortium including H&Q Asia Pacific and IMM Private Equity bought a 35% stake in Hi-Mart for $257 million in 2010. The company went public in June 2011, raising $384 million.
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