Two corporations—an artificial intelligence (AI) company and a real estate company—have submitted letters of intent (LOIs) for the public auction of Homeplus Co., which is pursuing a merger and acquisition (M&A) process before court approval of its rehabilitation plan. For Homeplus Co., which had struggled to find a suitable buyer, this offers a brief reprieve. However, there are views that the actual likelihood of an acquisition is low because the companies that submitted LOIs are far too small.
According to the investment banking (IB) industry on Jan. 3, Samil PwC, the sell-side advisor for Homeplus Co.'s pre-approval M&A, closed LOI submissions at 3 p.m. on Dec. 31. AI Fintech corporation Harex InfoTech and real estate leasing and development firm Snowmad submitted LOIs.
Under the public bidding schedule, bidders must conduct preliminary due diligence from today through the 21st and decide by the 26th whether to submit a final bid proposal based on the results. On that basis, Homeplus Co. plans to extend the deadline for submitting its rehabilitation plan, which is scheduled for the 10th. With a bidder emerging before the open sale, the industry sees a high likelihood that the court will grant an extension.
◇ Can a shrimp swallow a whale
But in the retail industry, there is a sense that the corporations expressing interest are not viewed as practical bidders. Homeplus Co.'s valuation is close to 4 trillion won (liquidation value 3.6816 trillion won), yet both companies are small and in the red, with no experience in retail.
Harex InfoTech is a corporation founded in 2000 that operates the payment-sharing platform "UBpay." According to Seoul Exchange Unlisted, a platform for unlisted stock transactions, the company posted 300 million won in revenue and a 3.3 billion won operating loss last year. The LOI reportedly stated a plan to raise $2 billion (about 2.8 trillion won) from a U.S. investor to acquire Homeplus Co.
Snowmad was established in 2007 through a partitioning from MyungSun Development. It has about 10 employees. Last year, it recorded 11.6 billion won in revenue and a 7.3 billion won net loss. Its accumulated deficit reached 39.9 billion won.
Homeplus Co.'s fiscal 2024 (March 2024–Feb. 2025) revenue is 6.9919 trillion won. The operating loss is 314.1 billion won, and the net loss is 574.2 billion won. Including partner companies, 100,000 workers are employed. However, due to years of operating losses and funding difficulties, it is currently running an emergency survival management system. Some stores are reportedly delaying payment of utility bills. A retail industry source said, "Their exact intentions will be revealed on the 26th, when a commitment letter must be submitted."
◇ The market's eyes turn back to NongHyup
The market's eyes are turning back to NongHyup. NongHyup did not participate in this bid. However, there is ongoing opinion, centered in political circles, that NongHyup should acquire Homeplus Co. Song Ok-ju of the Democratic Party of Korea said at the National Assembly's Agriculture. Food. Rural Affairs. Oceans. and Fisheries Committee audit on the 24th, "If NongHyup (which operates Hanaro Mart) acquires Homeplus Co., the practical benefits would be much greater."
Some local agricultural and livestock cooperative officials are also reportedly positive. In a survey of local agricultural and livestock cooperatives released by Song's office the previous day, 68% of responses from 166 professional managers at cooperatives nationwide said they were "positive" about acquiring Homeplus Co. However, as the results cover only 15% of the 1,110 total cooperatives, it is hard to say they represent the opinion of all cooperatives.
A bigger problem is that NongHyup's distribution institutional sector lacks strength. NongHyup Economic Holdings runs Hanaro Mart through its subsidiaries Hanaro Distribution and NongHyup Distribution. But since 2022, they have posted annual operating losses in the tens of billions of won. At the National Assembly audit on the 24th, National Agricultural Cooperative Federation President Kang Ho-dong said, "NongHyup Distribution and Hanaro Distribution are losing 40 billion won each annually, 80 billion won in total, and we restructured more than 200 employees," expressing a skeptical stance on acquiring Homeplus Co.
Some also view it as inappropriate to inject NongHyup's capital, a kind of public fund, to cover the management failure of Homeplus Co.'s largest shareholder MBK Partners (a private equity fund).
An industry source familiar with Homeplus Co.'s internal situation said, "A sale must happen no matter what right now. Even if NongHyup does not take over the whole company, if there is a review and a counteroffer on the acquisition, there is a strong chance the M&A will move forward."
Some also raise the possibility of selling Homeplus Co. stores separately. From a bidder's standpoint, if the company shrinks in size, accessibility increases. However, there are concerns that if stores are sold separately, it could turn into an asset sale. In other words, only stores in good locations would be acquired, leaving only loss-making stores, which could effectively lead to liquidation.
Lee Jong-woo, a professor in Ajou University's business administration department, said, "To protect employees, the 'Homeplus' brand must be preserved. If the stores are split and sold, it will be difficult for employees to keep their jobs." He added, "Whether it's NongHyup or anyone else, to get someone to buy Homeplus Co., it seems necessary to slim down the company through bold restructuring tailored to the buyer's preferences."