Homeplus Bidding Notice to Be Announced After Chuseok
Liquidation Value Exceeds Going Concern Value, Complicating Sale
Switch from "Stalking Horse" Method to Open Competitive Bidding
Chairman Kim Byungjoo: "There Is a Strong Negotiating Candidate"
The deadline for the sale of Homeplus, which is currently seeking a new owner, is fast approaching in November. MBK Partners, the largest shareholder, is making every effort to complete the sale, including pledging a cash injection of 200 billion won, but finding a new owner is expected to be challenging.
According to the investment banking industry on October 5, the Seoul Bankruptcy Court and lead manager Samil PwC plan to officially begin the sale process by announcing the Homeplus bidding notice right after the Chuseok holiday. Letters of intent and confidentiality agreements will be accepted until the 31st, followed by preliminary due diligence from November 3 to 21, and bid submissions will be accepted until November 26.
Earlier, Homeplus applied for corporate rehabilitation proceedings (court receivership) in March this year, and after the rehabilitation court allowed a pre-approval merger and acquisition (M&A) in June, the search for a new owner began. Coupang, GS Group, and NongHyup were mentioned as potential buyers due to the perceived feasibility, but all of these companies have distanced themselves from the deal.
Initially, the sellers considered a "stalking horse" method, in which a conditional acquisition contract is signed with a preferred bidder before opening a public auction. However, with major candidates opting out, this plan was abandoned in favor of a general competitive bidding process.
Industry insiders believe that finding a new owner for Homeplus will be difficult. The liquidation value of Homeplus has been assessed at 3.6816 trillion won, while the going concern value is 2.5059 trillion won. Any buyer must offer at least the liquidation value to acquire the company.
Intervention by the political sector to prevent MBK from closing Homeplus stores is also expected to be an obstacle to the sale. MBK had originally planned to close 15 of Homeplus's 68 leased stores, where rent negotiations had failed, by the end of the year. After entering corporate rehabilitation, store operations were disrupted due to supplier refusals to deliver goods, resulting in mounting losses. MBK aimed to improve profitability by closing some stores.
However, the Democratic Party of Korea, its internal Euljiro Committee, and the MBK-Homeplus Situation Resolution Task Force opposed this move after discussions, stating, "The closure of Homeplus stores is not simply a reduction in the number of outlets, but a serious issue threatening tens of thousands of jobs and the livelihoods of thousands of small businesses," and insisted that only a new buyer should decide on store closures. Given the high price tag of Homeplus and the difficulty of a complete sale, this decision is likely to be a burden for potential buyers.
Meanwhile, MBK is reportedly engaged in behind-the-scenes negotiations with prospective buyers. On September 19, Democratic Party lawmaker Kim Namgeun told reporters after a private meeting with MBK Chairman Kim Byungjoo at Homeplus headquarters in Gangseo-gu, Seoul, "(Chairman Kim) is currently negotiating with a strong candidate, and they have agreed to conclude the process by November 10 this year."
The fact that Chairman Kim referred to a "strong candidate" has raised hopes that corporate rehabilitation may be possible. The November 10 date specifically mentioned by Chairman Kim is the deadline for submitting the rehabilitation plan, which includes the M&A proposal. The deadline for submitting the rehabilitation plan was initially moved from July to September, and has now been pushed back to November, indicating a determination to find a buyer within this period. The deadline for completing the rehabilitation process is set for March next year. If the sale is not completed by then, the court will have no choice but to seriously consider asset split sales or liquidation proceedings.
To this end, MBK is making an all-out effort to ensure the sale, including cash support. Chairman Kim has committed to a personal donation estimated at 40 billion won and has arranged for MBK executives to provide joint guarantees for principal and interest on a 78 billion won DIP (debtor-in-possession) loan, which is a rescue loan for companies under rehabilitation proceedings.
Furthermore, on September 24, MBK issued a public apology and pledged an additional 200 billion won in support, bringing the total support for Homeplus to 500 billion won.
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