Friday, February 22, 2019

Tesco could face disappointing bargain sale of Korean business


The sale of Tesco‘s Korean business could earn the supermarket giant less than expected as the local currency slides, meaning CEO Dave Lewis‘s plans to clear the company‘s £22bn debt-ridden balance sheet may fall short of expectations.

The grocer is to finalise a shortlist of bids for its Homeplus supermarket chain today, in a deal valued at around£4bn.

Reuters suggested that private equity firms interested in the business had joined forces to form three separate teams, ahead of what is tipped to be Asia‘s biggest ever private equity deal.

Asia-based Affinity Equity is believed to have partnered with US private equity firm KKR, while the Carlyle Group is working with Singapore‘s GIC. MBK Partners will seek equity funding from South Korea‘s National Pension Service.

However analysts have speculated that the bidders may wait to get a better price or Tesco could decide not to sell, or even, delay the sale due to the Korean won plummeting almost 10% against the sterling since early June.

Lewis‘s sale of Homeplus follows part of a restructuring operation to turnaround the ailing supermarket, after it reported an annual loss of £6.4bn in April.

Homeplus generates an annual revenue of around 7.1tn won and with more than 400 stores, it is Tesco‘s largest business outside of Britain.

Charlotte Brown