MBK named preferred bidder for Tesco's Korea business - report

MBK, which has teamed up with Korea's National Pension Service, Canada Pension Plan Investment Board (CPPIB) and Singapore's Temasek Holdings, won out over two other consortiums, according to multiple reports. Affinity Equity Partners and KKR submitted a joint bid and another came from The Carlyle Group.

AVCJ Research's records indicate that Asia private equity investment totals $74 billion so far this year, higher than the full-year figures for 2012 and 2013. Investment reached a record $91.8 billion in 2014.

This year has already seen the region's largest-ever PE buyout with the announcement of KKR, Deutsche Bank and Varde Partners' acquisition of GE's Australia and New Zealand consumer lending business for approximately $6.3 billion. The Homeplus deal could potentially surpass this transaction. It would also underline Korea's growing share of the Asian buyout space, which came to 27% last year.

UK-based Tesco is divesting the asset to strengthen its balance sheet following a series of profit warnings. Earlier this year the company announced an annual net loss of GBP6.4 billion ($9.5 billion) and wrote down the value of its business by GBP7 billion. Net debt stood at GBP8.5 billion and the net pension deficit at GBP3.9 billion.

Homeplus is the second-largest supermarket retailer in Korea after E-Mart, with 968 stores - over half of which are franchised out - as of April 2015. The Korea business accounted for 12.3% of Tesco's group sales for the year, or around GBP8.6 billion. Tesco said in its annual report that the Distribution Industry Development Act, which oblige large-scale discount stores in Korea to close two Sundays each month so smaller-scale operators aren't squeezed out, continues to have a significant impact on business.

MBK was founded by Michael B. Kim, former president of Carlyle Asia Partners, and has $8.1 billion in capital under management. It closed its third fund, which targets control transactions in Greater China, Japan and South Korea, in October 2013 at the hard cap of $2.7 billion.

The firm is already responsible for one of Korea's largest-ever private equity buyouts. In 2007 it teamed up with Macquarie and selected co-investors to acquire cable TV provider C&M for $2.4 billion across two tranches. In 2013, it also completed a $1.65 billion carve-out of ING's Korea life insurance business.

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• Topics
• Buyouts
• North Asia
• Consumer
• buyout
• MBK Partners
• Consumer
• South Korea
• Temasek Holdings
• National Pension Service (Korea)
• Canada Pension Plan Investment Board (CPPIB)