Homeplus labor union "Corporate rehabilitation is intended to recover MBK investment... M&A concerns"

Union side "MBK abandons Homeplus and focuses only on recovering investment"

On the 4th, the Homeplus branch of the supermarket industry labor union directly criticized MBK Partners' excessive investment recovery strategy in relation to the start of corporate rehabilitation procedures, saying that it had brought about a management crisis.

On this day, the Homeplus union stated its position, saying, "Homeplus' management crisis is a tragedy caused by MBK's greed," and "government intervention is urgently needed." He then pointed out, "Despite Homeplus' financial difficulties, MBK has continued to pay dividends on redeemable convertible preferred stock and has not kept its promise to invest 1 trillion won. In fact, it has abandoned Homeplus and is focusing only on recovering its investment."

The union said, "Other than the vague stance of 'maintaining normal business operations,' the company did not reveal any specific reasons or plans. Everything was done in secret, and there was no discussion with the union before applying for corporate rehabilitation procedures. The livelihoods of approximately 20,000 union members and their families are threatened, and union members are suffering from extreme anxiety."

The union expressed concern that the start of the rehabilitation process would lead to store closures and mass layoffs, predicting, "Once the rehabilitation process begins, layoffs, wage cuts, and welfare reductions will be inevitable under the pretext of reducing fixed costs, and the worst-case scenario, such as store closures and asset sales, will become a reality." He also lamented, “After acquiring MBK, we have already reduced thousands of direct employees and there is no cost to reduce any more.”

The company must submit a rehabilitation plan by June 3 in accordance with the procedures.

Sales continue to rise, but rehabilitation procedures begin

MBK acquired Homeplus for 7.2 trillion won through a leveraged buyout (LBO) in September 2015. The union claimed, "Homeplus was responsible for the borrowings and interest incurred in this process, and the company's management condition became extremely poor. MBK reduced the scale of its business by selling stores indiscriminately to repay the loans, which led to a decline in its credit rating and loss of long-term competitiveness."

According to the Financial Supervisory Service's electronic disclosure system, Homeplus sales continue to increase based on the fiscal year (March to February of the following year), including ▲6.4807 trillion won in 2021, ▲6.6006 trillion won in 2022, and ▲6.9316 trillion won in 2023. As of January 31st of this year, sales for the previous 12 months amounted to 7.0462 trillion won. However, operating profit during the same period turned into a deficit: ▲2021 (KRW 133.5 billion) ▲2022 (KRW 260.2 billion) ▲2023 (KRW 199.4 billion). Cumulative operating loss in the third quarter of last year was 157.1 billion won, an increase of 20.6% compared to the same period last year.

Choi Cheol-han, secretary general of the Homeplus branch of the supermarket union, pointed out, "Currently, Homeplus stores are doing well. However, the reason for applying for corporate rehabilitation is probably because MBK intends to recover its investment." He explained, "MBK has tried to sell Homeplus for several years, but has failed every time. During this rehabilitation process, the possibility of attempting M&A at a low price through split sales, etc. cannot be ruled out."

Senior attorney Kim Won-sang, who heads Daeryun Law Firm's Corporate Rehabilitation and Bankruptcy Center, said, "M&A and acquisition of real estate assets are possible even during the rehabilitation process, and there have been cases where real estate assets were actually sold at a low price. However, even if the real estate assets were valued at 4.7 trillion won, it would not be possible to guarantee whether they would realistically be sold or converted into cash." He added, “Separately, salaries and severance pay for executives and employees must continue to be paid with priority.”
 

Reporter Hwang Jeong-won (jwhwang@mt.co.kr)

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Homeplus union "Corporate rehabilitation is intended to recover MBK investment... M&A concerns" (Shortcut)