Hedge Funds

Temasek joins MBK to bid for Tesco's S.Korea unit

A Tesco supermarket in Glasgow, Scotland.
Jeff J Mitchell I Getty Images

Asia-focused private equity firm MBK Partners has partnered with Singapore state investor Temasek Holdings to bid for the South Korea arm of British retailer Tesco, two people familiar with the matter told Reuters.

The sources declined to be named because the information remained confidential. A Temasek spokeswoman declined to comment while a spokesman for MBK could not be immediately reached.

MBK is competing against Affinity Equity Partners/KKR consortium and Carlyle for buying Tesco's South Korea unit valued at about $6 billion.

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Tesco is likely to pick a preferred bidder as early as this week, according to a person familiar with the matter. Tesco had set Monday as the deadline for final bids.

Homeplus, as Tesco's South Korean unit is called, MBK Partners, KKR, Affinity and Carlyle declined to comment. The people declined to be identified as the sale process is private.

"This is a mission-critical deal for Tesco," a third person with direct knowledge of the negotiations told Reuters, adding that the recent global market volatility stemming from China does not help matters as the won depreciates against the British pound and South Korea is seen tied to the Chinese market.

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"The impetus is on them to get the deal done very quickly, with extremely high certainty."

Tesco, Britain's biggest supermarket group, whose credit rating was cut to "junk" status by Moody's and S&P in January, is battling to recover from an accounting scandal and reverse its market share losses in Britain to discount chains Aldi and Lidl. The sale of the South Korean unit is the biggest divestment Tesco is making to improve its financials.

An Aug. 24 report by Macquarie Research said Tesco's disposal of its South Korean business could bring the British retailer back into investment grade territory two years ahead of the brokerage's current estimates.