Tesco Picks MBK as Preferred Bidder in up to $7 Billion South Korea Deal -- Update
September 02 2015 - 4:27AM
Dow Jones News
By Rick Carew in Hong Kong and Saabira Chaudhuri in London
Retailer Tesco PLC has picked Asian private-equity firm MBK
Partners LP as the preferred bidder to buy its South Korea retail
operations--its largest outside the U. K.-- in a deal that could be
worth between $6 billion and $7 billion, according to a person
familiar with the situation.
A sale by Tesco, if completed, would jettison a big chunk of
Tesco's global operations after a series of blunders at the U.K.
retail chain including an accounting scandal, massive write-downs,
and upheaval in its management ranks. Tesco is counting on the
proceeds from the sale, which could include a dividend being paid
out from the South Korean business, to help fund its turnaround
effort.
The deal will be among the largest transactions in Asia this
year and a landmark private equity deal in South Korea. MBK
Partners, which manages around $8.2 billion in assets, was founded
in 2005 by a group of former Carlyle Group LP executives.
MBK has been competing for the Tesco business in South Korea,
known as Homeplus, with a joint bid from KKR & Co. and Affinity
Equity Partners, according to people familiar with the situation.
MBK had initially teamed up with Goldman Sachs Group Inc. in its
bid, but Goldman later withdrew from the bidding consortium,
according to one person familiar with the situation.
The deal, if completed, would mark an about-face for the
battered supermarket chain, which under former Chief Executive
Terry Leahy embarked on an aggressive expansion plan, pushing from
five countries into 13. Tesco's South Korea arm has more than 900
fully-owned and franchise stores that serve about six million
customers a week.
A deal to sell the Homeplus chain would give Chief Executive
Dave Lewis more ammunition to turn around performance at home where
Tesco has lost ground to German discounters Aldi and Lidl, which
are expanding across the U.K. at a steady clip. Mr. Lewis has cut
prices, closed unprofitable stores, reduced Tesco's product lineup
and put more staff on the shop floor in a bid to stem the slide in
market share.
Tesco in April reported a pretax loss of GBP6.38 billion for the
year as it logged a massive property write down, and the company
also reported net debt of GBP8.5 billion. In addition to Homeplus,
Tesco has yet to close a deal to sell its data-analysis unit,
Dunnhumby. The company in January hired Goldman Sachs to weigh a
sale of the business.
Write to Rick Carew at rick.carew@wsj.com and Saabira Chaudhuri
at saabira.chaudhuri@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 02, 2015 04:12 ET (08:12 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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