Private equity firms team up to bid for Tesco's $6 bln S.Korea unit-sources (updated)

ORION Holdings

21/08/2015 12:40

* Sale could be Asia's biggest private equity deal ever 
    * PE firms team up to share risk of large deal 
    * Buyers need to tackle S.Korea's crowded retail market 
    * Sale to help Tesco cut debt, fund turnaround plan at home 
 
 (Adds details of bidders, Tesco unit) 
    By Joyce Lee and Kane Wu 
    SEOUL/HONG KONG, Aug 21 (Reuters) - Private equity firms 
have formed three separate teams to bid for Tesco's  TSCO.L  
South Korean business valued at about $6 billion, four people 
with knowledge of the matter said on Friday, in what is tipped 
as Asia's biggest ever private equity deal. 
    Asia-based Affinity Equity Partners has linked up with U.S. 
private equity firm KKR & Co  KKR.N , while Carlyle Group  CG.O  
has joined hands with Singapore's GIC  GIC.UL , the people said. 
    And North Asia-focused private equity firm MBK Partners will 
seek equity funding from South Korea's National Pension Service 
to bid for the unit, said the people, who declined to be 
identified as the sale process was confidential. 
    The forming of the teams by the private equity firms 
reflects the huge size of the deal, which could potentially be 
the second-biggest merger in the Asian consumer sector, and the 
recognition that risks need to be spread because of the tough 
nature of the South Korean retail market.  ID:nL3N0Z003N  
    KKR, MBK, GIC, National Pension Service and Tesco declined 
to comment. Affinity and Carlyle did not offer a comment. 
    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. 
    Tesco hired HSBC for the sale of the unit, Homeplus, and in 
July shortlisted Affinity, Carlyle, Goldman Sachs's  GS.N  
private equity arm, KKR and MBK Partners, sources have said. 
    It was not immediately clear if Goldman was part of any 
bidding group. The U.S. investment bank previously declined to 
comment on being part of the bidding for Homeplus. 
    Orion Corp  001800.KS , a non-private equity suitor, was not 
shortlisted but remains interested in the sale, an Orion 
official said. 
    The final bids for the business are due on Aug. 24, Reuters 
previously reported. 
    Homeplus Co Ltd is Tesco's largest business outside Britain, 
with annual revenue of 7.05 trillion won ($5.9 billion) in 2014. 
It has more than 400 stores and 500 franchise stores. 
    Homeplus's property holdings, consisting mainly of stores, 
had a book value of 3.09 trillion won as of the end of February, 
according to a regulatory filing. 
($1 = 1,187.7400 won) 
 
 (Reporting by Joyce Lee and Kane Wu; Additional reporting by 
Saeed Azhar in SINGAPORE and Prakash Chakravarti in HONG KONG; 
Writing by Anshuman Daga; Editing by Denny Thomas and 
Muralikumar Anantharaman) 
 ((jungyoon.lee@thomsonreuters.com; +82 2 3704 5609; Reuters 
Messaging: jungyoon.lee.thomsonreuters.com@reuters.net)) 
 
Keywords: SOUTHKOREA TESCO/SALE