SEOUL • Private equity firms have formed three separate teams to bid for Tesco's South Korean business, valued at about US$6 billion (S$8.4 billion), four people with knowledge of the matter said yesterday, in what is tipped to be Asia's largest private equity deal.
Asia-based Affinity Equity Partners has linked up with US private equity firm KKR & Co, while Carlyle Group has joined hands with Singapore's GIC, the people said.
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.
These moves reflect the immense size of the deal, which could become the second-largest merger in the Asian consumer sector. They also reflect the need to spread the risks because of the tough nature of the South Korean retail market.
KKR, MBK, GIC, the National Pension Service and Tesco declined to comment. Affinity and Carlyle did not offer a comment.
Tesco, Britain's biggest supermarket group, had its credit rating cut to "junk" status by Moody's and Standard & Poor's in January. It is battling to recover from an accounting scandal and to reverse market share losses in Britain to discount chains Aldi and Lidl.
Selling the South Korean unit would be Tesco's largest divestment to improve its financials.
Tesco hired HSBC for the sale of the unit, called Homeplus, and shortlisted Affinity, Carlyle, KKR, MBK Partners and Goldman Sachs' private equity arm last month, sources have said.
It was not immediately clear if Goldman was part of any bidding group. The United States investment bank previously declined to comment on being part of the bidding for Homeplus.
Orion Corp, a non-private equity suitor, was not shortlisted, but it remains interested in the sale, according to an official at the company.
The final bids for the business will be due on Monday, Reuters previously reported.
Homeplus is Tesco's largest business outside Britain, bringing in revenues of 7.05 trillion won (S$8.3 billion) last year. The chain has more than 400 stores and 500 franchise stores.
Its property holdings, consisting mainly of stores, had a book value of 3.09 trillion won as at the end of February, according to a regulatory filing.