[비즈한국] The arrest warrant for Kim Byung-ju, chairman of MBK Partners (MBK), has been dismissed. While Chairman Kim can breathe a sigh of relief, it is not the time to lower his guard. Homeplus is currently undergoing a rehabilitation process, but a clear path to a solution remains elusive. MBK is reportedly pursuing various measures to rehabilitate Homeplus. Nevertheless, the retail industry maintains a negative outlook on the future of Homeplus.
Judge Park Jung-ho of the Seoul Central District Court dismissed the arrest warrants for Chairman Kim Byung-ju and others on the 14th. On the 7th, the prosecution had previously requested arrest warrants for Chairman Kim and others on charges including fraud under the Act on the Aggravated Punishment, etc. of Specific Economic Crimes and violations of the Capital Markets Act. Judge Park explained, "While it is clear that the damage resulting from the incident is very serious, the materials submitted so far are insufficient to justify an arrest based on the level of evidence presented," adding, "Considering the level of clarification and the progress of the investigation, there is a greater need to provide an opportunity for an adequate defense while not under arrest, rather than a necessity for detention due to concerns about destruction of evidence or flight."
Although Chairman Kim Byung-ju and MBK have a brief respite, it is not time to be reassured. Voices of criticism against Chairman Kim remain high in civil society, including labor circles. The Joint Committee for Resolving the Homeplus Crisis stated in a release, "This court ruling, which seems to revive the ghost of 'wealthy are innocent, poor are guilty,' is the worst verdict that disregards the weight of the lives of 100,000 people working at Homeplus," and criticized, "The prosecution must immediately prepare to re-request the warrant."
For Chairman Kim Byung-ju, resolving the Homeplus crisis is an urgent priority. If the Homeplus crisis remains unresolved, not only will normal investment activities be difficult, but the possibility of a re-request for an arrest warrant cannot be excluded. It is not just civil society, but also the political sphere that has been criticizing Chairman Kim. Unless the sentiment of civil society and the political sector turns around, it could act as a negative factor for all of Chairman Kim's future activities.
MBK stated its position that it would focus on resolving the Homeplus crisis following the dismissal of Chairman Kim's arrest warrant. MBK announced, "We have endured responsible decisions to normalize the company through rehabilitation and will continue to do our best for the company's normalization," and added, "MBK and Homeplus will sincerely clarify their position based on the facts and legal principles in future legal proceedings as well."
Contrary to MBK's intentions, resolving the Homeplus crisis realistically appears difficult. Homeplus is reportedly planning to resolve the situation by selling Homeplus Express, liquidating underperforming stores, redeploying personnel, and obtaining 300 billion won in emergency operational funding (DIP) loans. However, no companies have yet come forward expressing interest in acquiring Homeplus Express. At one time, major domestic retailers such as Lotte Shopping023530, GS Retail007070, and E-mart139480 were mentioned as potential candidates, but it is known that these companies are not currently reviewing the acquisition of Homeplus Express.
The selling price of Homeplus Express discussed in the retail industry is around 700 billion won. Given the recent economic downturn, reactions suggest that a 700 billion won investment is burdensome. A retail industry official analyzed, "Considering the Ministop sale price was 330 billion won, the current valuation of Homeplus Express is too expensive, even considering the differences between convenience stores and corporate-type supermarkets (SSM)."
Another method is for MBK to take a loss and significantly lower the sale price of Homeplus. MBK acquired Homeplus for 7.2 trillion won in 2015. Analysts suggest that if MBK sells Homeplus at a much lower price, a buyer might emerge. However, the retail industry views this as an unlikely scenario. Based on MBK's past actions, the assessment is that the possibility of significantly lowering the sale price is low.
The liquidation of underperforming stores is currently ongoing. On the 14th, Homeplus announced it would cease operations at seven stores: the Munhwa, Busan Gamman, Ulsan Nam-gu, Jeonju Wansan, Hwaseong Dongtan, Cheonan, and Jochiwon branches. Although Homeplus stated it would guarantee employment by transferring employees to other stores, voices of anxiety have not subsided. With the number of stores decreasing significantly, it is uncertain whether the employment of all staff can be guaranteed. Securities firms anticipate that Homeplus will continue to liquidate additional stores.
Park Sang-jun, a researcher at Kiwoom Securities, evaluated, "Although the asking price for the Homeplus Express business unit has decreased compared to the past, it is questionable whether buyers will easily emerge considering the trend of declining sales per store among domestic SSMs," and "It is also unclear whether the existing creditors will agree to the 300 billion won DIP financing, as new creditors would have priority over existing ones for repayment." Researcher Park Sang-jun added, "It is judged that Homeplus is highly likely to expand the scale of store closures to cope with liquidity crises as time passes," and "In fact, the speed of discount store closures at Homeplus has been accelerating since the end of last year."
It is also expected that it will be difficult for Homeplus to recover its own performance for the time being. Although Coupang has recently faced various controversies, it possesses solid logistics hubs and possesses overwhelming delivery service capabilities compared to its competitors. Because of this, there are quite a few analyses that Coupang will have no problem surviving even if public opinion worsens.
However, Homeplus is evaluated as not showing any special competitive advantage compared to its competitors, E-mart or Lotte Mart. While it is strengthening its online business, it is difficult to see it as being superior to other e-commerce companies, including Coupang. To get ahead in the competition, corresponding investments are required, but in the current atmosphere, large-scale investment is realistically difficult.
If it is not resolved in the end, the possibility of MBK pulling out and Homeplus heading toward bankruptcy is also being cautiously discussed. Another retail industry official analyzed, "If Homeplus were a key national industry, the government might provide support, but honestly, it is difficult to see a huge impact on the lives of citizens even if Homeplus did not exist, so I view the possibility of public fund injection as low," and "Homeplus's performance is not growing, so there will likely be no company willing to pay a large sum to acquire it."