Will Homeplus' Fate Hinge on Mega Coffee Despite Tripled Debt?

SSM Bid Applications Open Until April 21

Multiple Companies Including Mega Coffee Operator Enter the Race

Major Retailers Also Seen as Potential Bidders

Rehabilitation Plan Approval Decision Due May 4

Even With Sale, Concerns O

As Homeplus marks the first anniversary of its corporate rehabilitation process, the company is pushing ahead with the sale of its supermarket division, Homeplus Express, as a pivotal step toward normalization. The first key milestone—selecting a shortlist of acquisition candidates—is now just a week away. Multiple companies are reportedly interested in acquiring Homeplus Express, drawing attention to whether the sale will be finalized and provide a much-needed lifeline for the company's survival.

According to industry sources on April 14, the Fourth Division of the Seoul Bankruptcy Court, which oversees Homeplus’s corporate rehabilitation, announced the sale of Homeplus Express on April 3 and will accept additional bids until April 21. The sale process stipulates that companies wishing to acquire Homeplus Express must submit a Letter of Intent (LOI) and a non-disclosure agreement by April 20. These companies will then be permitted to conduct due diligence on Homeplus Express and must submit their bids by 3 p.m. the following day.

A Homeplus Express store in Seoul. Photo by Yonhap News Agency

Mega Coffee Joins the Race—Will Multiple Bidders Compete?

Previously, Homeplus and its sale advisor, Samil PricewaterhouseCoopers, received LOIs from multiple companies by March 31. In response, the Seoul Bankruptcy Court decided to broaden participation by accepting additional applications beyond the initial bidders. Both the sale advisor and the potential candidates have remained tight-lipped about their involvement, citing confidentiality agreements. According to the investment banking industry, MGC Global—the operator of MegaMGC Coffee—and a distribution company based in South Gyeongsang Province are reportedly interested in acquiring Homeplus Express.

MGC Global, considered a leading contender, is said to have targeted the SSM business as a new growth area, judging that the low-cost coffee market is now saturated. Mega Coffee currently operates more than 4,200 stores nationwide, the highest number among domestic coffee brands. However, growth has slowed and competition has intensified, limiting further expansion potential.

Based on recent business performance, MGC Global appears to have ample capacity to acquire Homeplus Express. Last year, MGC Global recorded sales of KRW 646.9 billion, operating profit of KRW 111.3 billion, and net profit of KRW 84.2 billion, reaching an all-time high. During the same period, its cash and cash equivalents surged to KRW 153.4 billion—nearly triple the previous year. Including short-term financial instruments (KRW 31.9 billion), immediately available liquidity increases further. As the anticipated acquisition price for Homeplus Express is estimated to be around KRW 300 billion, the funding burden is not significant.

Synergy with the parent company is also cited as a favorable factor. MGC Global’s largest shareholder is Wooyoon Partners, established by Dae-Young Kim, chairman of food distribution firm Boratial. This could allow the combination of food ingredient distribution networks and offline retail to expand business operations. An industry official noted, “Mega Coffee has already established a nationwide offline network. If it secures distribution channels, it can integrate the entire value chain, from sourcing raw materials to sales. They are aiming to transform from a simple coffee franchise into a comprehensive consumer goods distributor.”

However, there is also considerable caution regarding the likelihood of a successful acquisition. MGC Global’s financial structure has rapidly deteriorated in recent years, posing a significant risk. The company’s debt soared from KRW 62.1 billion in 2022 to KRW 183.1 billion last year—nearly a threefold increase. Its debt ratio also jumped sharply from 52% to 135% over the same period. In contrast, equity only rose modestly from KRW 118.7 billion to KRW 135.7 billion.

Although MGC Global posted a total net profit of KRW 263.3 billion over the past four years, a significant portion of this was paid out as investment returns to Premier Partners, a financial investor (FI), and as dividends to the parent company. As a result, despite external growth, internal reserves have not sufficiently accumulated, leading to greater reliance on borrowing.

Another variable is the possibility that large distribution companies may join the bidding during the additional application period. While these companies have officially denied involvement, industry insiders consistently mention the potential participation of Lotte Mart and Lotte Super, GS Retail, as well as Chinese e-commerce (C-commerce) platforms, all of which operate SSM businesses. If MGC Global faces direct competition with established distributors that have both financial resources and store management experience, its comparative advantage may be limited. Ultimately, scenarios involving participation in a consortium or acquisition of only certain assets are seen as more likely than a solo acquisition.

Another industry source explained, “Unlike franchise models that focus on increasing store numbers, hypermarkets require core competencies in inventory, logistics, and merchandise planning (MD). Simply having an offline network does not guarantee synergy due to structural limitations.” The source added, “The plan to combine food ingredient distribution with retail makes sense in theory, but even existing large distributors have not achieved full integration. Especially if they want to secure house-brand (PB) products, logistics efficiency, and price competitiveness all at once, it will require substantial time and additional investment.”

At the Crossroads of Survival and Liquidation—Express Sale Is Critical

As of March 4, Homeplus entered its second year under corporate rehabilitation, and its situation is now described as ‘on the brink.’ On March 3, the Seoul Bankruptcy Court extended the deadline for approval of Homeplus’s rehabilitation plan by two months, until May 4. This extension grants Homeplus more time to implement the structural innovation plan it submitted to the court in December 2025, which includes the separate sale of Homeplus Express.

Homeplus's rehabilitation plan states that, over the next six years, the company will close 41 underperforming stores and improve workforce efficiency, reducing the number of employees from about 19,000 in February last year to around 16,000 by this month. This is expected to cut labor costs by KRW 160 billion. The major shareholder, private equity firm MBK Partners, injected a total of KRW 100 billion in emergency operating funds (DIP) through two rounds last month.

However, with no improvement in the financial situation, delays have occurred in supplier deliveries and employee payroll, with only half of last month’s wages paid. A supplier representative commented, “We have stopped trading with Homeplus, judging that it may be difficult to receive payments on time. Even if proceeds from the Express sale and emergency funds are injected, it is questionable whether there will be enough capital left to pay overdue wages, supplier payments, and various operating costs to truly restore the company.”

The Homeplus branch of the Mart Industry Union also raised questions about the effectiveness of management’s structural innovation plan, arguing that specialized restructuring entities with a public mandate—such as United Asset Management Company (UAMCO) or Korea Asset Management Corporation (KAMCO)—should take the lead in exploring recovery options.

In response, Homeplus stated, “Beyond workforce efficiency, visible results are expected, including over KRW 100 billion in improved operating profit from adjusting rental costs and closing unprofitable stores. If the planned restructuring is completed without delays and operations normalize, the company projects it could return to operating profit by 2028.”

This content was produced with the assistance of AI translation services.