Concerns Over 'Second Homeplus'... MBK-Owned Companies Facing Consecutive Management Declines

Nepa, Connect Wave, D'Live, and Others
Sharp Decline in Performance...
Common Burden of Acquisition Financing

As Homeplus enters corporate rehabilitation proceedings, attention is focused on the companies held by its major shareholder, MBK Partners (MBK). Many of the companies currently held are experiencing business deterioration, raising concerns about a 'second Homeplus' crisis.

According to the investment banking (IB) industry on the 20th, MBK currently holds 15 domestic companies. Among them, a significant number have shown worsened performance since MBK's investment.

A Homeplus store in Seoul. Photo by Yonhap News

The outdoor brand Nepa was acquired by MBK in 2013 through the establishment of a special purpose company (SPC), TV Holdings. At the time, it was expected to continue growing amid the outdoor boom, but since being incorporated into MBK's portfolio, it has been on a downward trajectory. In 2023, operating profit was 14 billion KRW, nearly half of the previous year's 27.1 billion KRW. Net profit turned to a loss.

The situation is also difficult for Connect Wave, acquired in 2022. This company was formed by merging IT price comparison site Danawa and reverse direct purchase company Korea Center. MBK Chairman Kim Byung-joo acquired the company to strengthen MBK's IT portfolio, but performance has declined since the acquisition. Operating profit for the first three quarters of last year was 20.2 billion KRW, down 29% compared to the same period the previous year.

Many other companies are also facing business deterioration. Cable TV operator D'Live, acquired in 2008 along with Macquarie Korea and others for about 2.3 trillion KRW, collapsed as the paid broadcasting market reorganized around IPTV. It has continued to post net losses due to massive financial costs. Lotte Card and MH&Co (Modern House) are also cited as examples of MBK's management failures.

A common factor among companies currently in crisis is the burden of acquisition financing. In the case of Nepa, MBK raised about 480 billion KRW of the 1 trillion KRW acquisition price through acquisition financing. The burden of acquisition financing was transferred to Nepa, and over nine years after the acquisition, Nepa has borne financial costs amounting to 273 billion KRW. D'Live also failed to repay the acquisition price, and management control was transferred to creditors in 2016.

Homeplus, which has entered corporate rehabilitation proceedings, is in a similar situation. MBK acquired Homeplus in 2015 for 7.2 trillion KRW. It invested 2.5 trillion KRW through a blind fund, and the remainder was borrowed under Homeplus's name. To alleviate the burden of acquisition financing, Homeplus adopted a 'sale and leaseback' method by selling prime stores and reopening operations through leasing. However, this significantly increased rental costs, depleting cash reserves and leading to deficits.

An industry insider explained, "While external uncertainties such as COVID-19 have increased, many competitors have grown during the same period," adding, "This is analyzed as a management failure due to inadequate market environment analysis."