With the slump in offline retail overlapping with the limits of private-equity-style management, the Homeplus Co. crisis is dragging on. As the absence of suitors and worsening operations fuel anxiety among stores, partners, and workers, political circles and stakeholders are shifting responsibility. We examine why Homeplus Co. has come to this point, what structural problems are blocking solutions, and what choices are needed going forward. [Editor's note]
The Democratic Party of Korea has been running a task force (TF) since on Sep. to resolve the Homeplus Co. crisis. At its launch, the TF said, "As the number of victims, including partner companies and employees, is estimated to reach 300,000 due to this situation, we need to review what policy responses are possible." At a news conference on the 5th of this month, the TF said, "The government and public restructuring bodies must step in."
However, experts say restructuring is inevitable for a prepackaged M&A that Homeplus Co. is pushing while delaying rehabilitation proceedings. If a proper buyer does not emerge, the company should consider a more realistic sale plan through aggressive slimming down (asset reduction).
In interviews with ChosunBiz on the 26th, experts agreed that selling Homeplus Co. is impossible in its current state. They said the sale attempt is likely to fall through because the acquisition prospects of the two firms that submitted letters of intent (LOIs) late last month are markedly low.
◇ "Sale possible only if the price is cut further"… calls for aggressive slimming down
Lee Jeong-hee, a professor of economics at Chung-Ang University, said, "They need to tidy up the price and internal conditions and look for a buyer again," adding, "No acquirer will take on the burden when uncertainties remain, from unresolved financial relationships to succession of employee contracts." Lee Jong-woo, a professor of business administration at Ajou University, said, "Homeplus Co. employees can maintain their livelihoods only if the company is acquired at a lower price than now," adding, "They should boldly reduce the number of stores to around 60 to 70 even if they take some losses." He added, "Some underperforming stores have been trimmed, but dozens of loss-making stores still remain."
Experts saw growing harm to workers as unavoidable in this process. Options mentioned included splitting by region or store, or separating entire business units. If divided by store, job cuts were expected to focus on locations with lower profitability.
In fact, last year a plan was floated to carve out and sell Homeplus Express, the corporate supermarket (SSM) arm of Homeplus Co., but it ultimately fell through amid opposition from the labor union. The market showed interest because, compared with hypermarkets, it generated more sales and had higher profitability, but the plan was hobbled by issues such as job guarantees, debt repayment, and cumbersome procedures.
Kwon Nam-hoon, president of the Korea Institute for Industrial Economics & Trade (KIET), said, "Scale matters in retail. A sale of Homeplus Co. as a whole is ideal, but given Homeplus Co.'s diminished viability amid recent market trends, partial sales should also be considered." He said, "Unconditional job guarantees are impossible regardless of how things unfold," adding, "We should work to soften and eliminate the shock, but the employment issue requires deeper thought while presenting the broader direction of industrial change and development."
◇ "Prime assets already exhausted… liquidation is a realistic option"
Experts also said most of the "prime" asset has already been disposed of, and given the poor conditions for offline supermarkets, pursuing liquidation would be more natural. If no sincere buyer emerges, winding down could actually help enhance the industry's competitiveness. In particular, there was strong opposition to government intervention or the injection of public funds.
Seo Yong-gu, a professor in the business administration department at Sookmyung Women's University, said, "Considering conditions inside and outside Homeplus Co., even if a new buyer emerges, the financial burden could lead to renewed distress, repeating a vicious cycle that only extends the company's lifespan." Yang Seok-jun, a professor in the business administration department at Sangmyung University, also said, "This situation cannot be separated from the decline of offline retail," adding, "It is doubtful whether Homeplus Co. itself has the ability to survive. Proper restructuring will help the overall growth of the industry."
Seo said, "The government should help in ways that minimize damage to workers and partners in the industrial ecosystem during liquidation." Lee Jong-woo also said, "From the standpoint of employment stability, some policy benefits could be considered, but it would be unfair for the government to solve a private company's problems under its lead."
◇ "This is not a problem to solve politically... the best the government can do is soften the shock"
An official at a private economic research institute, speaking on condition of anonymity, said, "This situation is not something that can be resolved through political logic by political circles," adding, "The best the government can do is to use existing policies—such as unemployment benefits, employment insurance, and job training—to lessen the expected shock."
Some say a company well-versed in retail should step up as acquirer, but the prevailing view in the industry is that this is not realistic. The stores and sites that could be profitable have all been sold, and what remains is only the "brand" called Homeplus Co. A retail industry official said, "There is a perception of the 'big three hypermarkets,' but I don't know who would acquire a company that is essentially an empty shell," adding, "The more a company understands the retail sector, where fixed expense control is key, the more it will shy away from an acquisition."
Meanwhile, experts said MBK Partners, the largest shareholder of Homeplus Co., should be held responsible for its management failure, but that this alone cannot solve the situation. Han Sang-rin, a professor of business administration at Hanyang University, said, "This is the result of the characteristics of private equity, market conditions, and structural issues intersecting. There are limits to placing all the blame on MBK." Yang said, "As the management owner, they put their members in difficulty, so they should bear moral responsibility."