Chicken supplier Harim emerges as major M&A player

Seen above is a retail store of Homeplus Express in Seoul, Wednesday. Yonhap

Harim Group, Korea's largest poultry processing firm, has emerged as a major player in the country's mergers and acquisitions (M&A) market, as its home shopping unit was selected as the preferred bidder to acquire Homeplus Express, a supermarket chain under ailing retailer Homeplus.

Homeplus and its sales advisor, Samil PwC, on Tuesday conducted a final round of bidding for Homeplus Express, naming NS Home Shopping the preferred negotiation partner.

MBK Partners, the largest shareholder of Homeplus, is seeking to sell the unit for around 300 billion won ($203 million), but Harim is reported to have offered less than that. If the two sides reach a deal, the proceeds will be calculated into MBK's rehabilitation plan for cash-strapped Homeplus. The court-imposed deadline for approval of the plan falls on May 4, leaving little room to delay the sale of Homeplus Express.

Once the sale of Homeplus Express is completed, Homeplus will be able to secure urgently needed cash, such as funds for wage payments. The company paid only half of its employees’ salaries last month and the rest was belatedly paid on April 17.

Starting out as a chicken supply business, Harim Group has expanded its scale through a series of takeovers. It acquired feed maker Jeil Feed in 2001, followed by pork processor Sunjin in 2007 and livestock farming and processing company Farmsco in 2008.

In 2015, it extended its domain to shipping, acquiring Pan Ocean for 1 trillion won. In 2023, the group attempted to acquire Korea's largest shipper HMM, being selected as the preferred bidder after betting 6.4 trillion won.

However, Harim’s bid for HMM fell through after it failed to narrow differences with the shipping firm’s creditors over management control. The failed attempt made headlines over Harim’s financial capacity, while also raising questions about whether it could actually secure funding on that scale.

Compared with its bid for HMM, the Homeplus Express deal is much cheaper, and Harim Group appears to have sufficient financial strength. Harim Holdings, the group’s holding firm, held 1.46 trillion won of cash and cash equivalent as of last year, while NS Shopping is estimated to be able to secure nearly 140 billion won in liquidity.

Harim Group headquarters in Iksan, North Jeolla Province / Courtesy of Harim Group

For Harim, the deal to acquire Homeplus Express is expected to be an opportunity to secure a nationwide distribution network without significantly increasing its financial burden, but there are several risks.

MGC Global and other firms that submitted letters of intent for Homeplus Express have withdrawn from the bidding, apparently due to the financial burden presented by operating costs after the acquisition of the firm.

Labor relations present another uncertainty. Homeplus’ labor union is considered relatively hard-line, and its integration with Harim Group, which was embroiled in controversy over alleged unfair labor practices around 2021, could be challenging.

NS Home Shopping, however, expressed confidence, saying that its 25 years of experience in handling fresh agricultural products and diverse food items would contribute to the stable, sustainable growth of Homeplus Express. It also underscored synergies with current Homeplus Express partners, as they can also gain opportunities to sell their products online by utilizing NS’ network.

“NS Home Shopping will be able to expand deeper into the offline sales channel, once the company overcomes such lingering risks,” an official from the retail industry said.