Latest news with #MichaelByung-juKim
Korea Herald
19-05-2025
- Business
- Korea Herald
MBK chief barred from leaving Korea in Homeplus fraud case
South Korean prosecutors have imposed a foreign travel ban on Michael Byung-ju Kim, chairman of Seoul-based private equity giant MBK Partners, as part of an investigation into fraud allegations related to the short-term debt issuance by supermarket chain Homeplus. The Seoul Central District Prosecutors' Office reportedly requested the Justice Ministry to place an exit ban on Kim. Prosecutors sought the travel restriction out of concern that Kim might not cooperate with the ongoing probe if allowed to leave the country. He also failed to appear at a National Assembly audit concerning the matter. On Saturday, prosecutors conducted a raid on Kim at Incheon Airport upon his return from London. During the operation, they retrieved a mobile phone used by Kim. MBK and its portfolio company Homeplus are accused of issuing asset-backed short-term bonds while allegedly anticipating a credit rating downgrade that was publicly disclosed on Feb. 28. Homeplus filed for court-led rehabilitation on March 4. The prosecution has been intensifying its investigation into MBK's top management. In late April, it raided the headquarters of both Homeplus and MBK Partners, as well as the residences of Kim; Kim Kwang-il, a partner at MBK and co-CEO of Homeplus; and Joh Joo-yun, also a co-CEO of Homeplus. Kim founded MBK in 2005. The firm, recognized as the largest buyout firm in Northeast Asia, manages over $30 billion in assets. Kim is among South Korea's wealthiest individuals, with a net worth of $9.7 billion as of 2024. In 2015, MBK acquired Homeplus for approximately $5 billion, marking the largest private equity-led deal in Asia at the time.
Korea Herald
15-05-2025
- Business
- Korea Herald
When is foreign too foreign? Korea's takeover tensions
Recent PE-involved M&A deals draw heated debate on security of key strategic technologies A recent streak of mergers and acquisitions led by private equity firms has intensified the debate over foreign-owned companies investing in Korean businesses, raising concerns about the possible outflow of key strategic technologies At the center of the controversy is a recent revision to the Enforcement Decree of the Act on Prevention of Divulgence and Protection of Industrial Technology. The updated regulation, set to take effect on July 22, does not apply "foreign investment" provisions to Korean-registered private equity firms, even if they are effectively controlled by foreign nationals. Previously, the government had considered including such firms under the scope of foreign investors. If enacted, this would have required them to seek prior approval from the Ministry of Trade, Industry and Energy before investing in local companies holding 'national core technologies.' In 2022 at an Industrial Technology Protection Committee meeting, former Industry Minister Lee Chang-yang noted that 'M&As led by local private equity firms, owned by foreigners, are tricky cases to handle." Yet the proposal was excluded from the final version of the revised decree. Experts point out that the revision has a loophole, as it does not define an investment led by a Korea-domiciled company controlled by foreign nationals as foreign. De facto control should be considered when categorizing foreign investment. 'It is not that all foreign nationals are likely to leak core technologies to other countries. That would be an exaggeration, almost xenophobic,' said a professor who specializes in technology security and wished to remain anonymous. 'But without tighter regulations on foreign ownership, foreign capital could indirectly acquire key technologies through domestic entities or funds. The legal loop provides grounds for the overseas leakage of key technologies.' A recent series of M&A deals led by such firms has brought more attention to the revised regulation and its shortcomings. Of the 'big four' PE firms in Korea, two are headed by foreign nationals. Korea Zinc, the world's largest refined zinc smelter, has been engaged in a power struggle against private equity giant MBK Partners since a buyout attempt in September. In a defensive effort to maintain control of the company, Korea Zinc called into question the nationality of the PE firm's chief and the company's funding sources. MBK is led by founder and Chair Michael Byung-ju Kim, a US national. To fend off the MBK camp, Korea Zinc acquired approval from the government to designate its high-nickel precursor manufacturing process as a national core and high-tech strategic technology, which would give the government approval rights in case of an acquisition of Korea Zinc by a foreign company. Though the designation was unlikely to block off MBK's takeover attempt, as the PE is not registered as a foreign company, it was seen as a move to pressure the rival by highlighting the potential of security threats. On a similar note, local chip-to-energy conglomerate SK Group is considering selling its controlling stake in SK Siltron, a semiconductor wafer producer. Local private equity house, Hahn & Co,. is named as a strong contender, given its close ties with the conglomerate. The PE firm has executed multiple deals with SK Group in recent years. Yet again, the nationality of its chief has come into question. While Hahn & Co. is a Korea-registered private equity house, its Chief Executive Officer Scott Sang-won Hahn is a US national. With SK Siltron's crystal growing technology designated a national core technology, a cross-border sell-off of the affiliate would require approval from the government. Hahn & Co., registered here, would be qualified without governmental approval. But the pressure of a potential security breach could work as a pressure, even undermining the firm's big store of dry powder and its strong chip network. 'When it comes to M&A deals on institutions with key strategic technology, the focus should rather be on how the given technology would be managed throughout the years,' an official from a local private equity firm said. 'A safety net is necessary, but the idea of raising guards against a company just because of a foreign national chief is outdated.'
Korea Herald
23-03-2025
- Business
- Korea Herald
Michael Byung-ju Kim: Raider or rescuer?
Michael Byung-ju Kim, founder of private equity firm MBK Partners, who was once hailed as the "godfather of Asian private equity" for landmark deals with his namesake firm, now faces accusations of being a corporate raider, amid mounting criticism of his aggressive tactics. In 2015, he made global headlines with the acquisition of Korean supermarket chain Homeplus for 7.2 trillion won ($4.92 billion) — the largest private equity-led deal in Asiaat the time. A decade later, that very deal has come back to haunt him. In 2025, Homeplus' debt woes have forced Kim to pledge his own assets to cover overdue payments, a bruising turn for the industry veteran who built his fortune on bold, successful buyouts. 'While private equity firms expect both gains and losses, Kim's pledge signals MBK's acknowledgment of failure in its Homeplus strategy," Lee Jeong-hwan, an associate professor at Hanyang University's College of Economics and Finance. Kim began his finance career at Goldman Sachs in 1986 before moving to Salomon Smith Barney, where he served as regional managing director, leading investments in Asia. In 1999, he joined Carlyle, becoming Asia president and driving the private equity giant's regional expansion. One landmark deal that brought Lee into the industry spotlight was Carlyle's 2000 acquisition of KorAm Bank, where Carlyle and JPMorgan jointly acquired a 36 percent stake for $430 million, later selling it to Citigroup for $2.7 billion in a successful exit. Building on this success, Kim left Carlyle in 2005 to found MBK Partners, a private equity firm named after himself. In the same year Korea had introduced regulatory frameworks for private equity, with Kim playing a key role in shaping the sector's growth. With MBK now the largest buyout firm in Northeast Asia, managing over $30 billion in assets, Kim is among Korea's wealthiest individuals. In 2024, Forbes ranked him as the country's second-richest man, with a net worth of $9.7 billion, following Samsung Chairman Lee Jae-yong. Kim has long emphasized improving corporate governance as one of his investment goals, particularly within Korea's "chaebol" system. In a 2024 interview with a Hong Kong news outlet, he described "corporate governance as a leading theme" in his Korean investments, citing the "structural hurdles" posed by family-run conglomerates. He also expressed his criticism of the system in a 2022 interview about his novel, "Offerings," where he said frustration with greed on Wall Street and corruption in Korea's chaebol inspired the book. In line with this, MBK has cited governance improvement as its rationale for involvement in high-profile, controversial ownership disputes within Korean conglomerates. In 2023, MBK partnered with a member of Hankook Tire & Technology's estranged founding family for a tender offer, but the bid failed due to insufficient shares. More recently, MBK has been in an ongoing ownership feud against Korea Zinc's Choi family, aligning with the zinc smelter's largest shareholder, Young Poong. While such aggressive ownership moves are more common in Western markets, industry insiders argue they clash with Korea's investment culture. "The private equity system was introduced to support (not challenge) local industry. That is why government policies and funds have backed it," a domestic private equity official said. "And challenging ownership structures without clear rationale carries significant risk." Despite controversies over failed investments and ownership disputes, professor Lee doesn't view them as failures of MBK's strategy. "While MBK may not have made the best investments, the lack of profitability in these companies is largely due to poor management, not MBK," he said. "There are always ups and downs — what matters is investor confidence." The investment strategies employed by MBK could damage its standing in Korea's investment environment, where public perception impacts fund raising. "In Korea, the largest investors are state pension funds managing public money," an official at a private equity firm said, noting that public reputation is a key factor these funds evaluate when reviewing partners. "While such aggressive strategies may be acceptable globally, decisions that severely damage its reputation are undesirable." Indeed, the National Pension Service, Korea's largest public fund, has distanced itself from MBK and its controversies, disclosing that its latest investment in MBK was conditioned on the company not getting involved in hostile takeovers. The NPS is considering applying this rule to future contracts with private equity firms. Further tarnishing MBK's reputation, the Korean-American entrepreneur faces personal controversies, including tax evasion allegations and concerns over funds being funneled abroad. The local tax agency, which reportedly imposed a 40 billion won tax liability on Kim in 2022, is now conducting a similar investigation.
Korea Herald
17-03-2025
- Business
- Korea Herald
Homeplus seeks to fix controversy over issuing empty shell bonds
MBK chief pledges personal wealth to aid small suppliers Homeplus, the country's second-largest hypermarket chain, said on Monday it is committed to fulfilling its financial obligations by repaying all creditors and investors impacted by the firm's initiation of court-administered rehabilitation proceedings. 'We deeply apologize for the temporary postponement of some debt repayments, including the securitization of accounts payable, due to the commencement of the rehabilitation procedure,' the firm said in a statement. 'We will negotiate with securities companies and others with the goal of paying all debts in full without avoiding responsibility.' The retailer filed for court-led rehabilitation on March 4 to alleviate its short-term debt burden following a credit rating downgrade, putting some 19,000 employees, 6,000 suppliers and partners, as well as its investors in jeopardy. Homeplus said it has already paid 351 billion won ($242.5 million) in accounts receivables, including supply payments to small businesses and settlement of rental stores, and plans to finalize all supply contracts with major suppliers within this week. Regarding asset-backed short term bonds, or ABSTB, which have sparked controversy concerning their potential impact on individual investors, the company said that it will repay the full amount in accordance with the rehabilitation process. Homeplus has transferred the payment for delivered goods to a mid-sized stock brokerage house, Shinyoung Securities, as accounts receivable from the credit card company. The securities firm then securitized the amount and sold it to retail investors as a form of ABSTB. The total amount of ABSTB issued by Homeplus in January and February before it filed for corporate rehabilitation is estimated at some 289.1 billion won, including 151.8 billion won in February, the highest in the last two years on a monthly basis. Financial authorities are investigating whether Homeplus and its major shareholder MBK Partners continued to issue short-term bonds despite being aware of the credit rating downgrade. The retailer is suspected of issuing 82 billion won worth of ABSTB on the same day its rating was slashed from A3 to A3- on Feb. 25. On Sunday, MBK Partners, a private equity fund that owns Homeplus, said its founder and Chairman Michael Byung-ju Kim will use his personal assets to help small business owners avoid pitfalls from the ongoing corporate rehabilitation. 'Chairman Kim will provide financial support so that we can make quick payments to small business partners who are expected to face difficulties,' it said in a statement. MBK's decision came amid growing calls that the firm take more responsive actions with critics alleging that the PEF opted to put Homeplus under rehabilitation only to mitigate its investment losses rather than address the underlying operational challenges facing the retailer, which runs 126 hypermarkets and 310 supermarkets nationwide. The specific amount of private funds to be contributed by Kim or the remaining unpaid balance of Homeplus has not yet been disclosed. Market experts estimate that Homeplus needs at least 1 trillion won in capital infusion to normalize its operations. 'We are currently estimating the total amount needed to pay small business owners, and will finalize the payment schedule in consultation with shareholders as soon as the calculation is completed,' a Homeplus official said. The MBK chairman's fund is likely to be used to pay for overdue delivery payments and settlement amounts. The National Assembly summoned the MBK head to attend an urgent inquiry into the Homeplus scandal on Tuesday, but he chose not to appear, citing that he doesn't participate in the management of individual companies in which investment has been completed. MBK and Homeplus are required to submit a rehabilitation plan, approved by creditors, to the court by June 3.
