Singapore investment firm Temasek Holdings is among a group of investors that have sealed a US$6 billion (S$8.5 billion) deal to buy South Korean retailer Homeplus from embattled British consumer giant Tesco.
The consortium of buyers is led by South Korea's largest private equity firm, MBK Partners, and also includes Canadian pension funds.
The group beat several other suitors, including American private equity firm The Carlyle Group and Singapore's GIC, which had teamed up to put in a bid.
The Straits Times understands Temasek's investment is about US$400 million (S$570 million). The deal is set to be the largest merger or acquisition ever done in South Korea. It will also be the biggest buyout ever seen in Asia Pacific.
This latest investment will fit in naturally with Temasek's portfolio, as consumer products has been one of the firm's top sectors for new investments in recent years. Last year, for example, it invested US$5.7 billion in health and beauty retailer A.S. Watson.
For Tesco, Britain's biggest retailer, the sale of Homeplus is a potential lifeline, aimed at helping turn the business around after it made a record £6.4 billion (S$13.8 billion) loss in the latest financial year.
It is also cleaning up an accounting scandal in which it had overstated profits by £263 million, by incorrectly booking payments from suppliers.
Tesco said in a statement yesterday that proceeds from the sale will be used to pay off debts and buy some of the stores that it leases.
"This sale realises material value for shareholders and allows us to make significant progress on our strategic priority of protecting and strengthening our balance sheet," Tesco chief executive Dave Lewis said in a statement yesterday.
Mr Lewis, who was parachuted in last year to head an overhaul of the business, has also axed over 11,000 jobs at Tesco worldwide. The idea of selling Homeplus arose during a strategic review he launched on its operations last year. "During this review, a considerable level of unsolicited interest was received from several parties in relation to the Homeplus business," Tesco said.
The purchase of Homeplus by MBK Partners puts the retailer back in South Korean ownership for the first time in 16 years. But its new owners have a task ahead as well.
Homeplus has seen three years of declining profit and revenue, and earlier this year recorded a full-year loss of £96 million for the 12 months ended February. This was partly due to a new Korean law aimed at protecting small grocers that curbs its opening hours during weekends.
It has also been embroiled in disputes with its labour union and earlier this year, company executives were indicted on charges of illegally selling the personal data of 24 million customers to insurance firms.
Homeplus has 140 hypermarkets, 375 smaller supermarkets and 327 convenience stores across South Korea. The deal is expected to be completed in the fourth quarter of this year, Tesco said.