Home Plus crisis sparks political backlash against Korea's top private equity firm
SEOUL, Aug. 11 (UPI) -- South Korea's leading private equity company MBK Partners said the troubles of its subsidiary Home Plus, the country's No. 2 discount chain, were not its fault.
"The management crisis at Home Plus is due to structural changes in the industry," MBK said in a statement last week, refuting allegations that the excessive loans and asset sales under its ownership resulted in the retailer's decline.
Citing a report from Samil PricewaterhouseCoopers, MBK pointed to rising minimum wages, higher rent and the growth of e-commerce companies as key headwinds. In other words, it framed the difficulties of Home Plus as part of a broader industry trend.
In response, politicians and Home Plus union leaders flatly dismissed the claims.
"Home Plus reduced the number of supermarkets and its debt ratio once topped 1,400%. This is typical of the way MBK conducts business with its acquired companies," Rep. Min Byung-duk of the governing Democratic Party told UPI.
"If the adversity of Home Plus was caused by industry-wide challenges, why are its rivals like E-Mart and Lotte Mart still doing well? MBK's comments are not true, and we're preparing for parliamentary hearings on the issue," he said.
Indeed, business bellwether E-Mart logged $34 million in operating profit last year and the figure is expected to surpass $360 million this year. No. 3 player Lotte Mart has also been largely profitable in recent years.
In 2015, MBK spent $5.1 billion to purchase Home Plus, which struggled to find its feet after the COVID-19 pandemic. It filed for corporate rehabilitation in March.
In June, MBK promised to write off its entire $1.8 billion stake in Home Plus to speed up the sales of the troubled company. Yet, politicians and unionists of Home Plus urged it to take further responsibility.
Meanwhile, Rep. Kim Nam-geun of the Democratic Party criticized the National Pension Service, which invested $443 million in MBK's acquisition of Home Plus in 2015. The pension fund's losses are believed to be significant.
"MBK has a track record of causing more than 10 companies to become insolvent. Nevertheless, the NPS neither investigated MBK's actions nor held it accountable," Kim said in an online message.
"If the NPS had adopted a principle of not investing in MBK, the firm could not have created private equity funds in Korea. A clear no-investment policy is necessary for private equity firms, which repeatedly draw public criticisms," he added.
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