Termination Notices and 50% Rent Cut Demands in Korea
Pursuit of Multi-Billion-Won Okuma Acquisition in Japan
MBK Partners, a private equity fund (PEF) manager and the largest shareholder of Homeplus, is reportedly seeking to acquire a Japanese machine tool company. This move is expected to spark controversy over the perception that MBK is prioritizing overseas acquisitions while neglecting domestic business, especially in light of Homeplus's unstable financial situation as it enters corporate rehabilitation proceedings.
According to multiple investment banking (IB) industry sources on May 27, MBK is currently considering the acquisition of Okuma, a leading Japanese machine tool manufacturer. The acquisition price is expected to reach several hundred billion won. There is speculation that a definitive agreement could be reached as early as the second half of this year. Okuma, with a history of over 120 years, is a leader in precision machining, and MBK’s move is seen as an effort to strengthen its manufacturing portfolio. MBK may pursue the Okuma acquisition either independently or as part of a consortium, but the specific acquisition terms have not yet been finalized.
However, this move is drawing criticism both inside and outside the industry, as it stands in stark contrast to the situation at Homeplus, which is currently undergoing rehabilitation proceedings. MBK has been criticized for actively pursuing new investments while failing to achieve a significant turnaround at Homeplus since acquiring it from Tesco in the United Kingdom in 2015.
Currently, Homeplus is negotiating rent reductions with landlords of its 61 leased stores nationwide. The company has requested a 50% rent reduction from private equity funds and a 35% reduction from public funds. During this process, Homeplus notified 17 locations where negotiations were unsuccessful that their contracts would be terminated. Of these, 10 locations are owned by MDM Asset Management, a subsidiary of MDM Group, the largest real estate developer in Korea. MDM Asset Management directly invested in a stake worth approximately 170 billion won when the fund was established, and recently, about 230 billion won in investment funds have been frozen as the Military Mutual Aid Association and Shinhan Capital exercised their put options on their holdings.
Meanwhile, on April 28, the Seoul Central District Prosecutors' Office’s Anti-Corruption Investigation Division 3 (headed by Lee Seunghak) conducted a search and seizure of the Homeplus headquarters and MBK Partners on charges including fraud under the Act on the Aggravated Punishment of Specific Economic Crimes and violations of the Capital Markets Act. Kim Byungjoo, chairman of MBK and a U.S. citizen, has also been barred from leaving the country.
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