Temasek joins consortium to bid for Tesco's South Korean unit, Homeplus: Sources

British retailer Tesco has received multiple separate binding bids for its South Korean unit Homeplus.
British retailer Tesco has received multiple separate binding bids for its South Korean unit Homeplus.PHOTO: REUTERS

SINGAPORE (REUTERS) - Asia-focused private equity firm MBK Partners has partnered with Singapore state investor Temasek Holdings to bid for the South Korean arm of British retailer Tesco, two people familiar with the matter told Reuters.

The sources declined to be named because the information remained confidential. A Temasek spokeswoman declined to comment while a spokesman for MBK could not be immediately reached.

MBK is competing against Affinity Equity Partners/KKR & Co consortium and Carlyle Group LP for buying Tesco's South Korea unit, Homeplus, valued at about US$6 billion (S%8.42 billion), Reuters has previously reported.

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.

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.

Homeplus is Tesco's largest business outside Britain, with annual revenue of 7.05 trillion won (S$8.27 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.