KKR, Carlyle among firms invited to bid for Tesco's S.Korea unit -sources (updated)

Hyundai Department Store Co

09/06/2015 06:44

* CVC, Affinity Equity, MBK also invited to bid 
    * Sale could be largest ever private equity deal in Asia 
    * Business had $750 mln in EBITDA 
    * S. Korea is mature and competitive retail market 
 
 (Adds details of the business, Hyundai's interest) 
    By Denny Thomas and Joyce Lee 
    HONG KONG/SEOUL, June 9 (Reuters) - British retailer Tesco 
Plc  TSCO.L  has invited at least six firms including KKR & Co 
 KKR.N  and Carlyle Group  CG.O  to bid for its South Korean 
unit Homeplus, valued at about $6 billion, people familiar with 
the matter told Reuters. 
    A sale is seen as Tesco's best bet to cut debt and fund a 
turnaround plan as it battles to recover from an accounting 
scandal and reverse market share losses at home to discount 
chains Aldi and Lidl. 
    If sold to private equity for $6 billion - which the sources 
say represents the equity value of Homeplus - the sale would be 
Asia's biggest private equity deal, according to Thomson Reuters 
data. It is also set to be the region's second-largest consumer 
retail deal ever.   
    London-based CVC Capital Partners, Hong Kong-based Affinity 
Equity Partners and Asia-focused MBK Partners were also invited 
to bid, the people said, declining to be identified as the sale 
process has not been formally made public. 
    A spokesman for Homeplus said the company does not comment 
on rumours. KKR, Carlyle, MBK and CVC declined to comment, while 
Affinity did not respond to a request for comment. 
    Separately, Hyundai Department Store Co Ltd  069960.KS  said 
on Tuesday it is considering a bid. Hyundai Department Store, 
which has a market value of some $3 billion, is not part of the 
Hyundai Group. 
    
    A CHALLENGING PURCHASE 
    Homeplus is Tesco's largest business outside Britain, with 
annual revenue of 7.05 trillion won ($6.3 billion) in 2014. It 
has more than 400 stores, 500 franchise stores and over six 
million customers a week. 
    But the business, which operates in a mature and competitive 
market, has been under some pressure, recording at least two 
straight years of declines in same-store sales. 
    "For any buyer, the challenge is how to turnaround the 
business. For private equity, it's a property play too and they 
can strip the real estate attached to the business and make some 
return," one person familiar with the process said. 
    Given the deal size, bidders moving to the next round are 
likely to team up or look to bring in sovereign wealth funds to 
help finance the acquisition, the people added. 
    Singapore state investor Temasek Holdings  TEM.UL  and other 
investors in private equity funds, such as pension funds, are 
likely to be approached as the bidding proceeds, said one 
person. 
    Temasek has shown interest in retail assets and last year  
acquired a 25 percent stake in Hong Kong tycoon Li Ka-shing's 
A.S. Watson for about $5.7 billion, in its single-biggest 
investment ever. 
    Temasek did not immediately respond to request for comment. 
    Tesco and its advisor HSBC  HSBA.L  have provided the 
potential suitors with Homeplus' financial details and asked for 
indicative bids to be submitted later this month, the people 
said. 
    They added that the business had about $750 million in 
earnings before interest tax, depreciation and amortisation. 
($1 = 1,118.8700 won) 
 
 (Reporting by Denny Thomas and Joyce Lee; Additional reporting 
by Elzio Barreto and Prakash Chakravarti at IFR/BasisPoint; 
Editing by Edwina Gibbs) 
 ((denny.thomas@thomsonreuters.com; +852 2843 6358; Reuters 
Messaging: denny.thomas.thomsonreuters.com@reuters.net)) 
 
Keywords: TESCO SOUTHKOREA/M&A