Tesco sells Homeplus – the jewel in its crown

Tesco has sold Homeplus, its South Korean unit, to a private-equity consortium led by MBK Partners for £4.2bn.

759-homeplus-634

One less thing to worry about for Tesco

Tesco has sold Homeplus, its South Korean unit, for £4.2bn. The retailer entered the country in 1999, and is now offloading the so-called "jewel in its crown" to a private-equity consortium led by MBK Partners. It marks Asia's biggest private-equity-backed deal to date. Tesco is grappling with over £20bn of debt (including pension obligations) and last year reported a loss of £6.2bn.

What the commentators said

Tesco's balance sheet was under great strain, said the BBC's Kamal Ahmed. There was talk of a rights issue, "never a happy prospect", and much of the debt had to be paid or refinanced in the next five years. Down-payments were needed to bring about an improvement in the group's credit rating, in turn allowing it to borrow more cheaply. At present, two of the three main credit-ratings agencies consider Tesco's paper "junk".

The price tag looks "fair" given the clampdown on opening hours for big retailers in Korea, reckoned Patrick Hosking in The Times, as well as the recent market jitters. It's one thing less for Tesco's "overstretched management" to worry about as they attempt to fix the British business. Particularly as CEO Dave Lewis still has to show he knows "how to get more customers through the door", said Ahmed.

Recommended

Share tips of the week – 30 September
Share tips

Share tips of the week – 30 September

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
30 Sep 2022
The best British tech stocks from a thriving sector
Share tips

The best British tech stocks from a thriving sector

Move over, Silicon Valley. Over the past two decades the UK has become one of the main global hubs for tech start-ups. Matthew Partridge explains why,…
29 Sep 2022
These 3 top value stocks offer
Share tips

These 3 top value stocks offer

Professional investor Adam Rackley of Cape Wrath Capital highlights three overlooked value stocks to buy.
29 Sep 2022
Three top-notch Asian stocks to buy
Share tips

Three top-notch Asian stocks to buy

Professional investors Adrian Lim and Pruksa Iamthongthong, managers of the Asia Dragon Trust, pick three of their favourite Asian stocks to buy now.
23 Sep 2022

Most Popular

Why everyone is over-reacting to the mini-Budget
Budget

Why everyone is over-reacting to the mini-Budget

Most analyses of the chancellor’s mini-Budget speech have failed to grasp its purpose and significance, says Max King
29 Sep 2022
How the end of cheap money could spark a house price crash
House prices

How the end of cheap money could spark a house price crash

Rock bottom interest rates drove property prices to unaffordable levels. But with rates set to climb and cheap money off the table, we could see house…
28 Sep 2022
What to do as the age of cheap money and overpriced equities ends
Investment strategy

What to do as the age of cheap money and overpriced equities ends

The age of cheap money, overpriced equities and negative interest rates is over. The great bond bull market is over. All this means you will be losin…
29 Sep 2022