Difficulties in Finding New Owner... Homeplus Says "Acquisition Possible for Less Than 1 Trillion Won"

Possible to borrow around 2 trillion won using real estate as collateral
Actual cash outlay expected to be less than 1 trillion won
"MBK gives up common shares... Barriers lowered depending on structure"

Homeplus, which is pursuing a pre-packaged merger and acquisition (M&A) before the approval of its corporate rehabilitation plan, is making an all-out effort to find a new owner, claiming that "the company can be acquired for less than 1 trillion won in cash, similar to purchasing an apartment with a jeonse lease."

In a press release distributed on July 8, Homeplus stated, "This acquisition can be likened to an 'apartment with a jeonse lease,'" and explained, "In this analogy, the apartment is worth 7 trillion won according to the appraisal, with 2.9 trillion won in jeonse (debt) attached. The previous owner (Homeplus' major shareholder MBK Partners) has decided to forgo its stake. Therefore, if the new buyer uses the apartment as collateral to borrow 2 trillion won to repay part of the jeonse and covers the remainder with cash, the actual cash outlay required to own the apartment would be less than 1 trillion won."

Homeplus Headquarters, Gangseo-gu, Seoul. Photo by Yonhap News

As the basis for this claim, Homeplus explained, "By utilizing the company's real estate assets, which are valued at 4.8 trillion won, and applying a typical loan-to-value (LTV) ratio, it is possible to borrow around 2 trillion won." The company further analyzed, "If the acquirer raises 2 trillion won through real estate-backed loans and covers the remaining shortfall with cash, the actual capital required could be reduced to less than 1 trillion won."

Homeplus also stated, "The existing major shareholder has decided not to assert any rights regarding its common stock investment, which amounts to 2.5 trillion won." The company added, "The new acquirer can immediately secure control through a fresh capital injection without the burden of acquiring the existing stake, and it is possible to acquire Homeplus at a value of around 3.7 trillion won, which is the liquidation value stated in the due diligence report."

Homeplus further explained, "Currently, total assets amount to 6.85 trillion won and liabilities amount to 2.9 trillion won." The company continued, "The corporate value of Homeplus, including its brand, business sustainability, and real estate holdings, is estimated at 7 trillion won, and among the total liabilities, the amount of debt requiring immediate repayment is between 2.5 trillion and 2.7 trillion won."

Homeplus' active efforts to sell the company by comparing it to an apartment with a jeonse lease appear to stem from the assessment that it may be difficult to find a buyer, as the sale price is expected to exceed the liquidation value of 3.7 trillion won.

Initially, Samil PwC, the lead manager for the Homeplus sale, planned to select a preferred bidder within this month, conduct a main bidding process as early as next month, and finalize the preferred acquirer by the end of September.