Private equity firms team up for Tesco's $6bn South Korean unit

Private equity firms have formed consortiums to bid for British retailer Tesco's $6bn (£3.8bn, €5.3bn) South Korean arm. The possible sale is expected to be Asia's biggest ever private equity deal.

Reuters, citing people with the knowledge of the matter, reported that Asia-based Affinity Equity Partners has linked up with its US peer KKR & Co, while Carlyle Group has joined hands with Singapore's GIC to bid for the business. In addition, North Asia-focused private equity firm MBK Partners will seek funding from South Korea's National Pension Service for the deal.

The firms' move reflects the huge size of the deal, and their intention to share risk because of the tough nature of the South Korean retail market.

Having been hit by an accounting scandal and tough competition from discount retailers such as Aldi and Lidl, Britain's biggest supermarket group is exploring options to improve its finances. The sale of the South Korean unit, Homeplus, is the biggest divestment of assets by the company, whose credit rating has been cut to junk status by S&P and Moody's in January.

Tesco has earlier hired HSBC to advise on a sale, and shortlisted Carlyle, Goldman Sachs's private equity arm, KKR and MBK Partners as potential bidders.