Private equity firm MBK Partners’ official announcement of the sale of its Super Supermarket Homeplus Express has sparked widespread interest in the industry. Given that its competitors have comparable revenue scales, acquiring Homeplus Express, which is ranked fourth in the sector, might drive the buyer to the top position.
Homeplus Express is recognized as a valuable asset because of its numerous storefronts in the Seoul metropolitan area, as well as its strong online and offline capabilities, which include a quick commerce (instant delivery) business supported by its own logistics facilities. This makes it appealing to e-commerce companies that need logistical hubs, like AliExpress.
Homeplus and the investment banking (IB) sector announced on June. 5. that MBK Partners and Homeplus had recently hired Morgan Stanley as the lead manager for the sale and had begun the process of selling Homeplus Express. According to reports, Morgan Stanley will approach approximately ten possible purchasers this month, including domestic and foreign retail corporations as well as e-commerce platforms.
As of the end of last year, the South Korean SSM market was dominated by a “Big 4,” each with market shares at the 20% level. Any firm that acquires Homeplus Express will immediately become the market leader. According to industry sources, due to competition concerns, corporations within the same field are more likely to be interested in the acquisition. When the convenience business Ministop went up for sale, a competitor, Seven-Eleven, purchased it.
Last year, GS THE FRESH was the top SSM company, with sales of 1.4476 trillion won (about $1.05 billion) and 434 outlets at the end of the year. Emart Everyday had sales of 1.4074 trillion won (about $1.02 billion) from 254 stores, while LOTTE SUPER had sales of 1.3063 trillion won (950.17 million) from 358 stores.
Homeplus Express, ranked fourth, generated revenues of 1.2 trillion won (about $873 million) and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of approximately 100 billion won (about $72.76 million). Notably, Homeplus Express’s EBITDA margin (8%) is higher than the industry average (5%), indicating its profitability.
Homeplus Express’s strengths include excellent accessibility, with its quick commerce business expanding at an average annual rate of more than 80% over the last two years. The platform’s combination of online rapid delivery and offline presence is also a big plus. Despite having 315 locations, 235 of them are located in the Seoul metropolitan area, the most of any SSM brand in this region. Although it has many stores, the acquirer can benefit from synergies through the acquisition.
Another factor prompting competitors to contemplate the acquisition is the resurgence of SSMs, which is being pushed by a desire for home-cooked meals and fresh food in the face of high inflation. According to the Ministry of Trade, Industry, and Energy’s retail sales statistics, key SSM companies (Homeplus Express, GS THE FRESH, Emart Everyday, and LOTTE SUPER) had sales rise by 8.0% year on year in the first quarter, the greatest growth since 2016. This growth rate outpaces that of major marts (4.0%), convenience stores (6.0%), and department stores (5.5%). The industry has also increased new shop openings, with the number of SSM stores falling from 1,094 in 2019 to 1,094 at the end of 2022 before rebounding to 1,147 as of last March.
