Troubled Tesco hires HSBC to explore sale of South Korean unit valued at $6bn

Tesco has reportedly hired HSBC to advise on the sale of its South Korean operations, valued at about $6bn (£3.89bn, €5.28bn).

Tesco's South Korean business, its biggest business outside of the UK, could attract bids from global buyout firms KKR, the Carlyle Group, CVC Partners and TPG Capital Management.

It could also interest some homegrown Asian buyout firms including MBK Partners, Reuters reported.

Tesco has received several inquiries in the past for its South Korean operations and that has encouraged the troubled retailer to explore a formal sale process. The South Korean unit generated about $750m in earnings before interest, tax, depreciation and amortisation (EBITDA) for the financial year 2014/15 and the business could be sold for seven to eight times EBITDA, the news agency added.

Pursued by Reuters, Tesco, HSBC, KKR and Carlyle refused to comment. TPG, CVC and MBK did not offer an immediate comment.

Tesco shares were trading 0.24% higher at 12.26pm in London trade, bucking a 1.29% drop on FTSE 100.

The potential sale of the South Korean business comes after Tesco announced in April its worst ever annual loss, hit by a one-off £7bn write-down.

The 96-year-old company is being restructured. The retailer, preoccupied by expensive overseas expansion, failed to spot the threat from discounters back home, resulting in lost market share and waning profits.

It was also hit by an accounting scandal and ratings downgrades.

Tesco's South Korean unit generated £5.38bn of revenue excluding value-added tax for the financial year 2014/15, a 4% drop in like-for-like sales from the previous year, according to its annual report.

The retailer had 425 outlets in South Korea at the end of the 2014/15 financial year.