The deal is done. Britain’s Tesco has been sold to a consortium led by Seoul-based private equity firm MBK Partners for $6.1 billion. The purchase marks South Korea’s biggest ever buyout.
“After a highly competitive process, we are announcing today the proposed sale of Homeplus, our business in the Republic of Korea,” said Dave Lewis, chief executive of Tesco –a company set on repairing a battered balance sheet by selling what was once referred to as the “jewel” in their international crown.
“If we didn’t know it already, the western retailers are abandoning their plans of world domination.”
“This sale realizes material value for shareholders and allows us to make significant progress on our strategic priority of protecting and strengthening our balance sheet,” added Lewis.
Homeplus Union expresses concerns
While Lewis and company were happy with the sale, the Homeplus labor union in Korea is anything but — saying that Tesco and MBK were hasty with the deal and should have conducted negotiations more openly.
The union, which represents an estimated 25,000 employees, biggest concern is that MBK will sell off their giant new investment piece by piece to maximize profit.
“The fact that the deal was agreed only within days hints at MBK’s speculative business management,” the union said in a statement.
MBK Partners responded with a pledge to maintain the company’s current workforce while investing $830 million in the enterprise.
Kim Kwang-il, a partner at MBK said that they respect the worker’s concerns.
“There will be no layoff or restructuring,” said Kim. “MBK will continue to cooperate with workers, the labor union and partners of Homeplus to maintain a productive relationship.”
Kim added that the business is doing well, implying further that selling wasn’t on the table.
“Homeplus is a leading retailer in Korea and generates high operating profits,” he said.
The Homeplus brand under Tesco operated over 400 stores in Korea under the both hypermarket and express forms, posting an annual revenue of 7.05 trillion won last year and 240.9 billion won in operating profit, according to the company’s regulatory filing.
Homeplus CEO, Do Sung-hwan, said the change in ownership meant a positive step forward with nothing changing.
“The only change after the deal is the name of the shareholder,” the CEO said in a statement. “But [our] 19 million customers, some 2,000 partners and 26,000 workers will remain the same.”
Do Sung-hwan was indicted in February for selling personal data collected from what prosecutors say was millions of customers for marketing purposes. The case is still pending.
The Western retailer retreat from Asia
“If we didn’t know it already, the western retailers are abandoning their plans of world domination,” analyst Bruno Monteyne told the Telegraph.
“Tesco can add Korea to China, Japan and the US as territories left in the last few years. This is further evidence that retail remains a local game, with locally managed players generally being the better competitors.”
Giant retailers such as America’s Walmart and France’s Carrefour, both who took a shot and failed in the South Korean market, would likely agree.