Tesco eyes stake in Hi-Mart
TESCO may bid for a controlling stake valued at about £570m in South Korean electronics retailer Hi-Mart, two sources with knowledge of the matter said yesterday, as the British grocer eyes growth markets to offset challenging times at home.
Disposable incomes across much of Europe are being squeezed by rising prices, muted wage growth and government austerity measures, with consumers also worried about the fallout from the Eurozone sovereign debt crisis. Those challenges led to Tesco issuing its first profit warning in living memory last month.
Retailers such as Tesco are looking to diversify revenue streams into Asia, where retail spending is considerably higher due to stronger economic growth.
Hi-Mart’s key shareholders, including Eugene Corp, have appointed Citigroup to advise on the sale. The 57.6 per cent combined stake up for grabs is worth about $900m (£571m) based on Hi-Mart’s latest share price.
The auction is largely attracting interest from South Korean domestic retailers, though some private equity firms are exploring options. Sources say private equity may find it hard to finance the deal.
First-round bids for Hi-Mart’s stake are due before the end of this month, it is understood.
Tesco already has exposure to the South Korean market through its fully-owned subsidiary Homeplus, which has 125 large retail stores and 267 supermarkets. Tesco runs more than 5,300 stores in 14 countries.