November 22, 2024

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(Yonhap)

South Korean e-commerce giant Coupang said Friday it is not considering acquiring a part of Homeplus, a supermarket chain grappling with poor performance in recent years.

The announcement was made in response to local media reports suggesting that Coupang plans to acquire Homeplus Express from MBK Partners, the private equity fund that owns Homeplus.

Homeplus' supermarket business comes in two types: Homeplus, a large discount store, and Homeplus Express, a smaller hypermarket. Homeplus operates 135 Homeplus stores, 332 Homeplus Express stores and 7 logistics centers across the country.

The reports speculated that the e-commerce giant intended to enter a quick commerce business, offering ultra-fast delivery in less than an hour using Homeplus’ logistics centers after the potential acquisition.

These speculations arose as MBK Partners, earlier in June, had put around 310 branches of Homeplus Express up for sale, appointing Morgan Stanley to manage the transaction.

Last month, AliExpress Korea, a local unit of the Chinese e-commerce platform, also dismissed similar speculations fueled by local reports that AliExpress and MBK Partners were discussing the transfer of Homeplus Express.

Homeplus has been struggling with poor performance in recent years, largely driven by the COVID-19 pandemic when strict social distancing measures led consumers to opt for e-commerce platforms. Other supermarket chains here, including Emart Everyday, Lotte Super and GS The Fresh, also experienced similar situations.

Homplus’ combined annual sales declined from 7.66 trillion won ($5.56 billion) in 2018 to 6.48 trillion won in 2021. Although sales increased slightly afterward, the company's operating profit has been in deficit since 2021.

MBK Partners acquired Homeplus in 2015 for 7.2 trillion won from the British retail conglomerate Tesco. MBK Partners contributed 2.2 trillion won and financed the remaining 5 trillion won with loans under Homeplus' name. Of the total debt, they managed to repay approximately 4 trillion won by selling some 20 large-size branches.

Industry experts suggest that MBK Partners is looking to retake its investment amid the increasingly challenging retail environment for brick-and-mortar stores, which have been losing ground to e-commerce platforms.

“When MBK Partners acquired Homeplus in 2015, the market share between online and offline retail was almost 30 to 70. Now, in 2024, the ratio has shifted to 50 to 50, leading to decreased sales and profits for supermarket operators primarily based on offline stores. MBK Partners likely did not anticipate such a shift,” said an industry official who wished to remain anonymous.

The official added that MBK Partners is likely looking to sell not only Homeplus Express but also Homeplus, as next year marks ten years since its acquisition of the retailer, a period often considered the maturity of investments in the market.

However, MBK Partners has stated that it is not attempting to recoup its investment, and the decision to sell Homeplus Express to increase the efficiency of Homeplus' operation.

By Hwang Joo-young (flylikekite@heraldcorp.com)