Tesco may slash Homeplus sale price as Korean won weakens

25th Aug 2015 08:36

(ShareCast News) - Tesco may have to reduce the asking price if it wants to sell its Korean business, Homeplus, after potential bidders failed to submit bids amid the stock market and currency turmoil.The deadline for the three shortlisted private equity companies to make their bids to Tesco was already pushed back to Monday after it was missed last week despite negotiations having been waged for several months, which has now led to Tesco being forced to reduce the asking price for Homeplus, according to the Independent.New doubts have now assailed the FTSE 100 grocery giant's disposal as the Korean won has weakened 2% against the pound in the last week and almost 4% in the last month, making the hoped-for £3.8bn price tag look considerably doubtful.Last week it emerged that the private equity firms interested in the business had formed three separate teams. Asia-based Affinity Equity Partners joined up with US private equity firm KKR, an arm of Goldman Sachs, while Washington DC-based Carlyle Group teamed up with Singapore's sovereign wealth fund GIC and North Asia-focused private equity firm MBK Partners sought equity funding from South Korea's National Pension Service to bid for the unit.Reuters said the forming of the teams by the private equity firms reflects the huge size of the deal, which could potentially be the second-biggest merger in the Asian consumer sector.In May, Tesco's chief executive Dave Lewis was said to have rejected a £4bn bid for the Homeplus business despite his eagerness to sell the unit in an attempt to cut the company's £22bn debt pile, fund a turnaround plan and recover from an accounting scandal and market share losses to discounters.In a June update the company reported another slip in revenues, but said the sales decline was slowing. International like-for-like sales improved, although Korea and Thailand LFLs were down by just over 3% and 2% respectively.Tesco is also exploring sales of its other South East Asian units, with a February approach by Thai billionaire Dhanin Chearavanont in with an offer to buy its Thai operations, Tesco Lotus, while its Malaysian unit has also attracted interest.