Background and Process of MBK's Acquisition of Homeplus
In 2015, the British retailer Tesco decided to sell its South Korean subsidiary Homeplus to overcome its financial crisis. At that time, Homeplus was the second-largest hypermarket in the country, holding a stable cash flow, but it became a target for sale during Tesco's restructuring process.
MBK Partners acquired Homeplus for 7.2 trillion won, financing 5 trillion won, or 71%, through debt. This was done via a leveraged buyout (LBO), and the acquisition was adjusted after excluding accumulated undistributed profit of 1.3 trillion won. This method is interpreted as a strategy to maximize the use of internal funds.
MBK promised job security at the time of acquisition, but in reality, restructuring proceeded. When news of the acquisition was announced, unions and employees expressed concerns about job security. MBK announced that "there would be no artificial restructuring," but in fact, gradual cost reductions and restructuring were implemented after the acquisition.
Ultimately, as of March 2025, Homeplus filed for corporate rehabilitation. This series of events highlights the importance of management strategy following a corporate acquisition.
Main Controversies After MBK's Acquisition
MBK's acquisition of Homeplus sparked significant controversy due to concerns about short-term profit-seeking and restructuring. Since hypermarkets have a substantial impact on local economies and consumer welfare, focusing on investment recovery rather than a long-term perspective can heighten the chances of store closures and asset sales. This situation suggests negative implications for the local community and economy.
🔹 Job security issues
While promises were made for job security at the time of acquisition, new hiring has been suppressed and wage freezes have occurred. This has led to workforce reductions through natural attrition and voluntary resignations, exacerbating conflicts with the unions.
🔹 Controversy over real estate asset utilization
Strategic moves are being made to secure funding by selling key real estate assets nationwide. After selling stores utilizing the sale and leaseback (S&LB) method, rental burden has increased. This process raises concerns about the long-term competitiveness of Homeplus and suggests an emphasis on maximizing investment recovery rather than improving financial structure.
Major Store Sales and Internal Strategies
After the acquisition, MBK sold major real estate assets of Homeplus to secure cash.
They raised over 1 trillion won by selling various stores, including the Siheung, Ulsan, and Gumi locations. Some stores, despite being sold, have seen Homeplus re-entering, leading to increased rental costs which are expected to negatively impact long-term profitability.
Additionally, MBK is pushing for the separate sale of the Homeplus Express (SSM) division, which is interpreted as a strategy to maximize investment recovery. MBK has stated that the goal of the sale is to "improve financial structure and focus," but analysis suggests that it is, in reality, a strategy aimed at short-term investment recovery.
Deterioration of Homeplus's Performance After Acquisition
Since 2023, Homeplus's performance has sharply declined, resulting in a drop in credit ratings and a surge in funding costs. After the MBK acquisition, Homeplus's sales and profits have consistently decreased, and the number of stores and employees has also been on the decline.
📉 A comparison of key indicators before and after the Homeplus acquisition reveals a more serious situation.
| Category | 2014 (Before Acquisition) | 2023 (After Acquisition) |
| Annual Revenue | About 8.5682 trillion won | About 6.9315 trillion won |
| Annual Operating Profit | +200 billion won (profit) | –199.4 billion won (loss) |
| Number of Stores | 141 | 126 |
| Number of Employees | About 25,000 | About 19,500 |
As revenues stagnate or decline, Homeplus has shrunk in size. From the 2021 fiscal year, operating losses began to occur, resulting in three consecutive years of losses. Consequently, the total capital of Homeplus plummeted from approximately 2.2958 trillion won in late February 2015 to about 265.3 billion won by late February 2024, reaching a staggering decline of 88%.
With deteriorating financial structure, Homeplus is struggling due to continuous losses and accumulated deficits. On the other hand, E-Mart has shown a contrasting picture with sales growing from over 13 trillion won to nearly 20 trillion won, along with a close to doubling of its equity.
As a result, Homeplus has weakened to the point where its position as the second-largest player in the industry is jeopardized, facing the risk of falling behind Lotte Mart in competition. This situation is expected to have a significant impact on its future market position.
Application for Corporate Rehabilitation and MBK's Response
Ultimately, MBK and Homeplus management applied for the corporate rehabilitation process, that is, the initiation of court management.
MBK describes this as a "preemptive measure," but the industry interprets it as an investment failure. Under court management, not only is debt restructuring possible, but the likelihood of asset sales also increases. In this context, the strategy of selling remaining assets to minimize losses is under scrutiny.
Unions and the industry expect that MBK will attempt to recover the final investment capital through the corporate rehabilitation process. As a result, the acquisition of Homeplus by MBK is increasingly likely to be recorded as an investment failure case.
Going forward, attention is focused on what actions MBK will take during the court management process and whether Homeplus can find a new owner for its normalization.
#MBK Partners, #Homeplus, #corporate rehabilitation, #M, #&A, #private equity, #corporate raider, #leveraged buyout, #asset sale, #investment strategy, #retail industry, #economic news, #job security, #restructuring, #labor issues, #asset liquidation, #store closures, #court management, #corporate management, #investment analysis, #South Korean economy, #consumer impact, #Homeplus sale, #private equity controversy, #corporate analysis, #debt management, #financial structure, #market economy, #mergers and acquisitions, #Homeplus crisis, #MBK strategy
