Tesco's South Korean auction hit as China market problems cause currency turmoil

$6bn (£3.8bn) price tag now unlikely to be achieved

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The Independent Online

Three private equity firms were expected to submit final bids for Tesco’s South Korean business last night as the supermarket attempts to offload one of its most successful international assets to prop up its dreadful balance sheet.

An initial deadline for bids passed last week and was extended to yesterday after months of arduous negotiations, leading to Tesco having to reduce the asking price for the Homeplus business.

However, the deal was thrown into further doubt as the local currency took a dive due to the China market problems, with a $6bn (£3.8bn) price tag now unlikely to be achieved.

The three bidders are: Asia-based Affinity Equity Partners, which has linked up with the US private equity firm KKR; Carlyle Group in partnership with Singapore’s GIC; and north Asia based private equity firm MBK Partners together with South Korea’s National Pension Service.

Despite wide reporting of the deal and negotiations, Tesco refused to confirm or deny that the division was up for sale, reiterating that the entire business was “under review”.

The supermarket has confirmed it is planning to sell its Dunnhumby data business, but a £2bn price tag was drastically reduced when Tesco failed to get any interest. Instead, the advertising group WPP with CVC, TPG and New Mountain Capital are expected to offer a maximum of £700m.

Tesco’s South Korean business has been a rare success story for the supermarket in recent years, following the fallout from a £263m accounting scandal which is currently being investigated by the Serious Fraud Office.

However, the division has struggled more recently, with sales in the country falling 4 per cent last year due to a crackdown on Sunday and early morning trading by the Seoul government.

If the deal goes ahead – it has been mooted for several months – it would be the second-biggest merger in the Asian consumer sector.

In recent years Tesco has withdrawn from Japan and formed a joint venture in China with the state-run supermarket group China Resources Enterprise where it has a minority stake. The tieup led to the majority partner recording a loss.

Tesco needs the sale proceeds to shore up its balance sheet after reporting a record £6.4bn loss last year – the worst in its history – leading to new chief executive Dave Lewis declaring that the company must undergo a review to balance the books.

All sides declined to comment yesterday.

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