SEOUL, Aug 25, 2015:
British retailer Tesco has received three separate binding bids for its South Korean unit from a consortium of Affinity Equity Partners and KKR & Co, Carlyle Group LP, and MBK Partners, people familiar with the matter said.
The bids have come in at around the seven trillion won (RM24.7 billion) mark, one of the people said, adding that Tesco is likely to pick a preferred bidder as early as this week. Tesco had set yesterday as the deadline for final bids.
Homeplus, as Tesco’s South Korean unit is called, MBK Partners, KKR, Affinity and Carlyle declined to comment. The people declined to be identified as the sale process is private.
The deal is expected to move speedily, with another person having knowledge of the matter saying Tesco and advising bank HSBC could pick the preferred bidder by early September at the latest.
“This is a mission-critical deal for Tesco,” said a third person with direct knowledge of the negotiations, adding that the recent global market volatility stemming from China does not help matters as the won depreciates against the British pound and South Korea is seen tied to the Chinese market.
“The impetus is on them to get the deal done very quickly, with extremely high certainty.”
The won has dipped about 10% this year against the British pound.
Tesco, Britain’s biggest supermarket group, whose credit rating was cut to “junk” status by Moody’s and S&P in January, is battling to recover from an accounting scandal and reverse its market share losses in Britain to discount chains Aldi and Lidl.
The sale of the South Korean unit is the biggest divestment Tesco is making to improve its financials.
An Aug 24 report by Macquarie Research said Tesco’s disposal of its South Korean business could bring the British retailer back into investment grade territory two years ahead of the brokerage’s current estimates.