Analysis: Business model of Asia's top private equity fund questioned
Kim Yeong-hee works at a Homeplus Geumcheon branch. Late last week, MBK vowed to write off its entire stake in Home Plus to facilitate the company's corporate rehabilitation process.File photo by Jeon Heoo-Kyun/EPA-EFE
SEOUL, June 20 (UPI) -- Michael Byungju Kim, who worked at Goldman Sachs and the Carlyle Group, founded MBK Partners in 2005. Over the next two decades, he built it into one of Asia's leading private equity funds through aggressive mergers and acquisitions. It now manages up to $30 billion in assets.
However, Chairman Kim and MBK face challenges, because of its major investments in Home Plus, South Korea's No. 2 discount chain, and Lotte Card, the country's fifth-largest card issuer. This prompts experts to question the business model of the buyout fund.
Late last week, MBK vowed to write off its entire stake in Home Plus to facilitate the company's corporate rehabilitation process. The firm stated that "All $1.8 billion worth of common shares held by MBK in Home Plus will be canceled without compensation."
This means that MBK is ready to walk away from the Home Plus investment empty-handed, although it poured billions of dollars to take over the supermarket chain.
In 2015, MBK acquired Home Plus from Tesco in a $5.1 billion deal financed through a combination of equity and debt. But the rise of e-commerce and the impact of the COVID-19 pandemic severely undermined its performance.
Since 2021, Home Plus has reported losses for four consecutive years, and its debt-to-equity ratio surged to nearly 500% this year. It filed for corporate rehabilitation in March, and MBK eventually decided to relinquish all management rights and claims while receiving nothing in return.
Yet, MBK is under pressure to do more, as the National Assembly Speaker Woo Won-shik noted during his visit to a Home Plus outlet in Seoul on Wednesday. He accused MBK of showing an irresponsible stance.
"The livelihoods of some 100,000 people, who are directly and indirectly employed by Home Plus, are now at risk. The damage is already severe," Woo wrote on social media.
"Even after initiating rehabilitation procedures, MBK failed to assume responsibility, instead shifting the burden to workers and merchants through delayed payments, asset sales, and store closures," he added.
Woo hinted at potential legislative action, including a parliamentary hearing and new regulations targeting private equity funds.
Lotte Card up for grabs
There are other crucial tasks for MBK and its Chairman Kim, particularly regarding Lotte Card. In 2019, MBK partnered with Woori Bank to channel $1 billion for a 79.8% interest on Lotte Card. MBK holds 59.8% and Woori has the remaining 20%.
MBK tried to sell its stake in Lotte Card in 2023, but failed. The fund strives to divest its stake once again by reportedly sending teaser letters to multiple potential bidders, including Hana Financial Group, last month. UBS is managing the sales, with preliminary bids expected to open as early as mid-July.
It remains to be seen whether MBK will be able to dispose of Lotte Card this time. But the sale price is predicted to go down due to the recent setbacks of the company.
Lotte Card's net profit for 2024 more than halved to $100 million compared to $269 million in 2023. During the first quarter of 2025, it netted $10 million in profit, down 42.4% from a year before.
Two years ago, MBK reportedly hoped to secure at least $2.2 billion for its stake, but the price is feared to decrease substantially now, which may significantly reduce MBK's potential profit.
"MBK's business model has been very successful over the past 20 years as shown by the fact that its founder Kim has become the wealthiest man in the country," Seoul-based consultancy Leaders Index CEO Park Ju-gun told UPI.
"But, its business model is now being put to the test. The company would have to worry about its damaged reputation and growing political momentum for regulating private equity funds," he added.
In the 2025 Forbes billionaire list, Kim was second to none among South Koreans with $9.5 billion in wealth, surpassing $8.2 billion of Samsung Electronics Chairman Lee Jae-yong.
Park expected that the country's unicameral parliament might introduce an act curbing highly leveraged buyouts and banning private equity funds from directly managing companies after acquisition.
Seo Yong-gu, a professor of business administration at Sookmyung Women's University, echoed the concerns, although he opposed excessive regulations.
"MBK has played a key role in developing Korea's capital market. But buyout funds have often been criticized for seeking short-term gains at the cost of long-term growth for a fast exit. We may need a reform," he said in a phone interview.
"Highly leveraged acquisitions are also problematic. Still, I am against the idea of prohibiting private equity funds from managing their portfolio firms. It would fundamentally deny the very essence of the business," he said.
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