MBK puts Homeplus’ supermarket chain unit up for sale

MBK Partners, the North Asia-focused private equity firm, has put the supermarket chain unit of South Korea’s hypermarket operator Homeplus up for sale as part of ongoing efforts to improve the retailer's financial health ahead of its exit.

MBK Partners and Homeplus recently selected Morgan Stanley as a manager to sell Homeplus Express, said investment banking industry sources on Monday. The seller is expected to send a teaser letter to about 10 potential buyers such as retailers, e-commerce operators and online platforms at home and abroad as early as this month, according to the sources.

The deal is expected to reboot the sluggish local acquisition market as Homeplus Express is likely to attract buyers with its strong foothold in the offline and online fresh food delivery sectors, the sources said.

“Retailers are predicted to show strategic interest in the company as it is an omnichannel with strength in both online and offline sales, which was hardly seen in the local acquisition market,” one of them said.

Omnichannel is a term used in e-commerce and retail to describe a business strategy that aims to provide a seamless shopping experience across all channels, including in-store, mobile, and online.

HIGHER EBITDA MARGIN THAN INDUSTRY

Homeplus Express established in 2004 is one of the big four supermarket chain operators along with GS Retail Co.’s GS The Fresh, E-Mart Inc.'s E-Mart Everyday and Lotte Shopping Co.'s Lotte Super, which account for more than 20% each of the local market.

Homeplus Express was estimated to log 100 billion won ($72.5 million) in earnings before interest, taxes, depreciation, and amortization (EBITDA) last year with sales of 1.2 trillion won, industry sources said, although the unlisted company has yet to release official earnings.

Its profitability was better than those of competitors with an estimated EBITDA margin of some 8% topping the industry’s average of about 5%.

That came as Homeplus Express has more branches in the Seoul metropolitan area than its rivals. The supermarket chain operator runs 235 stores, about 75% of its total 315 branches nationwide, in key commercial and residential areas of the capital and surrounding regions.

Other major supermarket chain operators have 50-60% of their stores in the areas.

Homeplus Express’ online delivery service enjoyed sales growth of 80% in the last two years thanks to the store locations, industry sources said.

The company operates a one-hour delivery service from the time of ordering,  utilizing offline stores to take advantage of the rapid growth in available groceries, including fresh foods, the sources said.

Write to Jun-Ho Cha at chacha@hankyung.com
 

Jongwoo Cheon edited this article.