MBK Partners is the only financial bidder for eBay Korea, the wholly-owned unit of the US online retailer, which has drawn top Korean retailers, the country's largest mobile carrier and a Singapore-based e-commerce startup as preliminary bidders.
Now the North Asia-focused private equity firm is transforming itself into a strategic buyer for the No. 3 e-commerce company in South Korea, making its fully-owned Korean retailer HomePlus a bidding entity for what is estimated to fetch around 5 trillion won ($4.4 billion).
The acquisition deal for eBay Korea, which runs three online platforms, is likely to accelerate a shake-up in the country's retail landscape, with deep-pocketed No. 2 player Coupang Corp. gearing up for aggressive expansion following its spectacular New York listing earlier this month.
The rapid rise of online and mobile platforms such as Naver Corp. and Kakao Corp. in the e-commerce market also prompted traditional retailers Shinsegae and Lotte to enter the race for eBay Korea. The bidders saw the acquisition as the only opportunity to jump to the sector's top position in the near term.
Making HomePlus a bidding entity is seen as part of MBK's effort to raise the chances of winning the deal, with chief executives of the supermarket chains of both Shinsegae and Lotte making public their keen interest in eBay Korea. HomePlus is one of leading retailers in South Korea, alongside Shinsegae's E-Mart and Lotte Shopping.
HomePlus has hired an advisor to acquire eBay Korea, according to the M&A industry sources on Mar. 24. MBK is understood to target the e-commerce company, which has a combined market share of 12%, as a bolt-on acquisition to aid in its exit from HomePlus which has taken a heavy battering from consumers' shift to online market places.
FINANCING PLANS
By way of HomePlus, MBK can improve its financing capabilities because HomePlus is able to use its real estate as collateral to borrow loans, said investment banking sources.
In comparison, MBK, as a bidding entity, needs to tap one of its buyout funds to finance about half of the acquisition cost, given that borrowings secured on shares in eBay Korea are restricted to half the total purchase price. A shortfall, if any, could be covered by MBK's special situation funds.
"When MBK acquired HomePlus, it saw 6 trillion won out of the 7 trillion won acquisition price as real estate value," said one of the banking sources. "Given the good collateral value of HomePlus' real estate, MBK may want to make full use of them."
HomePlus saw its net losses widening to 532.2 billion won in the fiscal year of 2019 ended in February 2020, versus a shortfall of 132.7 billion won a year earlier. Its operating profit dwindled by almost 40% to 160.2 billion won during the period, with a slight drop in sales.
To cover the losses, HomePplus has sold some of its stores across the country. In 2019, MBK had attempted to cash in HomePlus' real estate by pooling the retailer's 51 stores into a real estate investment trust (REIT) and list it on the domestic stock market. But the plan fell through due to a lack of demand.
eBay Korea runs the Auction and Gmarket online shopping malls, as well as G9 LOTTE, SHINSEGAE
Shinsegae is seeking to buy eBay Korea through its supermarket chain E-Mart which picked JPMorgan as advisor. Lotte Group is participating in the competition through Lotte Shopping, its supermarket unit.
Earlier this week, E-Mart CEO Kang Heui-seok and Lotte Shopping CEO Kang Hee-tae said at their annual shareholder meetings that both companies are seriously considering acquiring eBay Korea.
Industry sources expect E-Mart to join forces on the bid with Affinity Equity Partners, the second-largest shareholder of SSG.COM, Shinsegae's e-commerce platform.
Another bidder Qoo10 was founded in 2010 by Gmarket founder Ku Youngbae and eBay Inc. as a joint venture of cross-border shopping platform. An e-commerce industry source said Ku has long desired to buy back Gmarket after he sold the online retailer to eBay.
