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MBK poised to exit from Homeplus investment

Members of the Homeplus union stage a rally in front of MBK Partners headquarters in Jongno-gu, Seoul, Wednesday. They denounced MBK Partners' rumored plan to sell off Homeplus branches which they say will destroy thousands of jobs. Courtesy of Homeplus union
Members of the Homeplus union stage a rally in front of MBK Partners headquarters in Jongno-gu, Seoul, Wednesday. They denounced MBK Partners' rumored plan to sell off Homeplus branches which they say will destroy thousands of jobs. Courtesy of Homeplus union

By Nam Hyun-woo

MBK Partners Chairman Kim Byung-ju
MBK Partners Chairman Kim Byung-ju
Korea's leading private equity firm (PEF) MBK Partners is accelerating efforts to exit from its investment in discount chain Homeplus, as the fund operator attempts to sell cash-cow branches while collecting hefty dividends.

According to Homeplus' union, the company has put three branches in the cities of Daegu, Daejeon and Ansan up for sale. NH Investment & Securities is the lead manager for the Ansan branch's sale, while the two others will be managed by Deloitte Anjin.

When selling their branches, retail chains here have commonly leased the sold branches back in order to maintain their sales networks.

Homeplus, however, will sell those branches with the purpose of closing them, and the buildings will be reconstructed as residential complexes, according to the union.

Homeplus said it is an effort to "minimize its liquidity risks in the wake of the crisis in off-line retail businesses," but market interpretation is that this is a bid to cut costs before MBK's exit.

MBK owns a 100 percent stake in Homeplus through a number of special-purpose companies after paying 7.2 trillion won for the nationwide retailer in 2015.

According to the union, the company's net profit stood at 733.3 billion won from March 2016 to February last year, but the dividend to its shareholders reached 1.21 trillion won, meaning its dividend payout ratio was 165 percent.

But, Homeplus said that the dividend went to Homplus Stores, which was a parent organization of Homeplus, not to investors including MBK Partners. Only institutional investors like NPS who invested into Homeplus' preferred shares have been received 21.4 billion won per year as dividend.


Since MBK's acquisition of Homeplus, the union claimed MBK has sold a number of real estate assets owned by the company, including branches, land and employee training and logistics centers, with a combined value reaching 2.21 trillion won.

While paying out handsome dividends and generating real estate profits, Homeplus' operating profit has also dropped from 309 billion won in 2016 to 269 billion won in 2017 and 151 billion won in 2018.

Last year, MBK attempted to list Homeplus' real estate investment trust (REIT), which is based on the chain's 51 branches across the country, and sought to raise at least 1.5 trillion won. However, the plan foundered as it failed to draw institutional and foreign investors' interest during the pricing process.

Retail industry officials say Homeplus' branch sale this time shows MBK's intent to exit from the discount chain businesses, citing the significance of the branches put up for sale.

The Ansan branch is one of the top-selling branches among more than 140 Homeplus outlets across Korea. The Daejeon branch is also among the top 30 branches, while the Daegu branch is the oldest Homeplus branch in the country.

"If MBK has an intention to maintain the discount chain business, it should have tapped into branches whose sales are poor," a retail industry official said on condition of anonymity. "Many retailers in Korea are restructuring their offline bases as consumers have migrated to online shopping, but that is about unprofitable branches."

As MBK is poised to sell off those key branches, employees are expressing their concerns over job cuts.

On Wednesday, Homeplus union members staged a protest in front of MBK headquarters in Jongno-gu, Seoul, denouncing the sales bid and saying it will end up slashing thousands of jobs.

"The Ansan branch has 218 directly hired employees and the total workforce there reaches 1,000," Korean Mart Labor Union head Kim Ki-wan said during the rally. "The sale of key branches shows that MBK is not interested in managing Homeplus or maintaining job security, and is focused on real estate speculation."

Regarding the sales attempt, Homeplus said it is true that the company is "considering various options on liquidating assets," but confirmed nothing on how it will handle those branches.

"Homeplus hired 14,283 contracted workers as full-timers with benefits last year," a Homeplus official said. "There is no chance of firing employees at branches which may be affected by asset liquidation. Even if the Ansan branch were to close down, directly hired employees will be relocated to our online businesses."

The official also denied MBK's involvement in the asset liquidation bid, saying Homeplus is managed by Homeplus' management.


Members of the Homeplus union stage a rally in front of MBK Partners headquarters in Jongno-gu, Seoul, Wednesday. They denounced MBK Partners' rumored plan to sell off Homeplus branches which they say will destroy thousands of jobs. Courtesy of Homeplus union
Members of the Homeplus union stage a rally in front of MBK Partners headquarters in Jongno-gu, Seoul, Wednesday. They denounced MBK Partners' rumored plan to sell off Homeplus branches which they say will destroy thousands of jobs. Courtesy of Homeplus union

By Nam Hyun-woo

MBK Partners Chairman Kim Byung-ju
MBK Partners Chairman Kim Byung-ju
Korea's leading private equity firm (PEF) MBK Partners is accelerating efforts to exit from its investment in discount chain Homeplus, as the fund operator attempts to sell cash-cow branches while collecting hefty dividends.

According to Homeplus' union, the company has put three branches in the cities of Daegu, Daejeon and Ansan up for sale. NH Investment & Securities is the lead manager for the Ansan branch's sale, while the two others will be managed by Deloitte Anjin.

When selling their branches, retail chains here have commonly leased the sold branches back in order to maintain their sales networks.

Homeplus, however, will sell those branches with the purpose of closing them, and the buildings will be reconstructed as residential complexes, according to the union.

Homeplus said it is an effort to "minimize its liquidity risks in the wake of the crisis in off-line retail businesses," but market interpretation is that this is a bid to cut costs before MBK's exit.

MBK owns a 100 percent stake in Homeplus through a number of special-purpose companies after paying 7.2 trillion won for the nationwide retailer in 2015.

According to the union, the company's net profit stood at 733.3 billion won from March 2016 to February last year, but the dividend to its shareholders reached 1.21 trillion won, meaning its dividend payout ratio was 165 percent.

But, Homeplus said that the dividend went to Homplus Stores, which was a parent organization of Homeplus, not to investors including MBK Partners. Only institutional investors like NPS who invested into Homeplus' preferred shares have been received 21.4 billion won per year as dividend.


Since MBK's acquisition of Homeplus, the union claimed MBK has sold a number of real estate assets owned by the company, including branches, land and employee training and logistics centers, with a combined value reaching 2.21 trillion won.

While paying out handsome dividends and generating real estate profits, Homeplus' operating profit has also dropped from 309 billion won in 2016 to 269 billion won in 2017 and 151 billion won in 2018.

Last year, MBK attempted to list Homeplus' real estate investment trust (REIT), which is based on the chain's 51 branches across the country, and sought to raise at least 1.5 trillion won. However, the plan foundered as it failed to draw institutional and foreign investors' interest during the pricing process.

Retail industry officials say Homeplus' branch sale this time shows MBK's intent to exit from the discount chain businesses, citing the significance of the branches put up for sale.

The Ansan branch is one of the top-selling branches among more than 140 Homeplus outlets across Korea. The Daejeon branch is also among the top 30 branches, while the Daegu branch is the oldest Homeplus branch in the country.

"If MBK has an intention to maintain the discount chain business, it should have tapped into branches whose sales are poor," a retail industry official said on condition of anonymity. "Many retailers in Korea are restructuring their offline bases as consumers have migrated to online shopping, but that is about unprofitable branches."

As MBK is poised to sell off those key branches, employees are expressing their concerns over job cuts.

On Wednesday, Homeplus union members staged a protest in front of MBK headquarters in Jongno-gu, Seoul, denouncing the sales bid and saying it will end up slashing thousands of jobs.

"The Ansan branch has 218 directly hired employees and the total workforce there reaches 1,000," Korean Mart Labor Union head Kim Ki-wan said during the rally. "The sale of key branches shows that MBK is not interested in managing Homeplus or maintaining job security, and is focused on real estate speculation."

Regarding the sales attempt, Homeplus said it is true that the company is "considering various options on liquidating assets," but confirmed nothing on how it will handle those branches.

"Homeplus hired 14,283 contracted workers as full-timers with benefits last year," a Homeplus official said. "There is no chance of firing employees at branches which may be affected by asset liquidation. Even if the Ansan branch were to close down, directly hired employees will be relocated to our online businesses."

The official also denied MBK's involvement in the asset liquidation bid, saying Homeplus is managed by Homeplus' management.


Nam Hyun-woo namhw@koreatimes.co.kr

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