Tesco bags £4 billion in sale of South Korean arm Homeplus

Homeplus was once considered the jewel in Tesco's crown

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Tesco has ended its 16-year venture in South Korea after selling its South Korean arm, Homeplus, in a £4 billion deal.

The buyer, Asian private equity firm MBK, is understood to have beaten two other bidding groups - Affinity Equity Partners (which was working with US giant KKR), and Carlyle Group - to snap up Homeplus, once considered the jewel in Tesco's crown.

MBK, which a led a consortium that included South Korea’s National Pension Service, the Canada Pension Plan and Singapore’s Temasek, will pay just over £4 billion before tax and other transaction costs, Tesco said in a statement.

Overall the deal gives Homeplus an enterprise value of £4.2 billion, it added.

The sale is part of a turnaround plan masterminded by Tesco chief executive Dave Lewis.

He took the helm a year ago after the grocer was hit by a £263 million accounting scandal and began urgent efforts to restore the company's balance sheet.

Today Lewis, a former executive at Unilever, said: “This sale realises material value for shareholders and allows us to make significant progress on our strategic priority of protecting and strengthening our balance sheet.”

HSBC acted as the lead financial adviser on the transaction, while Barclays' investment bankers were financial advisers and sponsor to Tesco for the deal.