Homeplus bidding closes Monday

Private equity groups are expected to submit final bids to take over the nation’s second-largest supermarket chain Homeplus, valued at about 7 trillion won ($5.86 billion), amid growing speculation that two Korean retail firms are mulling to join the deal when the preferred bidder is announced, according to sources on Sunday.

Five shortlisted private equity firms formed three consortiums for Monday’s final bidding for Homeplus, wholly owned by Tesco. The British retail giant put up its Korean unit for auction in a bid to scale back the mounting debt and fund a turnaround plan.

Sources said the Korean confectionery company Orion and local retail giant Hyundai Department store are eyeing to join the bid as strategic investors.

“As Orion continues to show a strong will to buy Homeplus, there’s potential that it will link up with a private equity fund to be selected as a preferred bidder,” an official at an investment bank said.

The snack-maker, which failed to make the final list of five bidders, has been seeking a foray into the supermarket industry as its growth slows.

The preferred bidder is expected to be announced in September while the takeover deal to be wrapped up by the end of this year.

For one of the biggest merger deals in Asia’s consumer sector, Asia-based Affinity Equity Partners reportedly has joined up with U.S. private equity firm KKR, while Carlyle Group has teamed up with Singapore’s GIC.

North Asia-focused private equity firm MBK Partners seeks equity funding from Korea’s state-run National Pension Service to bid for the unit.

Hyundai Department Store, the nation’s No. 2 department store chain, is also watching the deal closely to expand its retail business portfolio as its rivals Lotte and Shinsegae have their supermarket chain units.

Homeplus is Tesco’s largest business outside the U.K., with an annual revenue of 7.05 trillion won in 2014. It has more than 400 stores and 500 franchise outlets.

By Park Han-na (hnpark@heraldcorp.com)