Homeplus, Three Weeks Left for Revival Chance... Union: "M&A with a Proper Company"

Large-format supermarket Homeplus will resume operations at 67 stores nationwide on the 13th. This comes about a month after it entered temporary closure last month due to financial difficulties. To avoid the worst-case scenario of liquidation (bankruptcy), Homeplus must maximize its operating performance over the next three weeks, until the final deadline for approval of its reorganization plan on the 4th of next month, in order to convince creditors that recovery is possible.

Industry consensus holds that the urgently secured 200 billion won DIP serves as a "catalyst" for the reorganization plan, and that beyond high-intensity restructuring and mergers and acquisitions (M&A), there is no clear exit strategy. Amid this, Homeplus union officials have stated that current major shareholder MBK Partners (hereinafter MBK) must withdraw from company management as soon as possible.

According to relevant industry sources on the 10th, after visiting soft-opening stores in local areas such as Jeonju, Andong, and Gumi over the weekend, Homeplus Mart Industry Union executives declared that "MBK will ultimately attempt liquidation" and emphasized that "before that happens, an M&A with a 'proper company' must take place." This reiterates their previous demands for a change in administrator and government-led reorganization efforts.

However, market conditions are not favorable. Above all, it is difficult to find companies expressing interest in acquiring Homeplus. An industry official stressed that "the key to any Homeplus M&A lies not in the acquisition price but in the issue of employment succession." Even if a buyer has sufficient financial capacity, various risks surrounding Homeplus—including a strong union and potential contingent liabilities—make advancing an M&A difficult.

The excessive management interference by the Homeplus union is also evident in its confrontation with company management over how to use the 200 billion won DIP. Company management proposed using as much of the 200 billion won as possible for product supply and delaying salary payments. While most employees, including those from general unions, accepted this proposal, the Mart Industry Union affiliated with the Korean Confederation of Trade Unions (KCTU) countered that these terms were not negotiated in advance.

Industry consensus holds that employee sacrifices are inevitable if products are to be supplied normally to Homeplus store shelves. This implies that a significant portion of the 200 billion won DIP must be used for product supply. Typically, securing an appropriate level of merchandise and inventory for one large-format supermarket store requires operating costs of 30 billion to 40 billion won. Only by allocating most of the secured DIP to product supply can the 67 stores resume normal operations.

According to the Ministry of Employment and Labor, as of late June this year, Homeplus's unpaid wages are estimated at around 33 billion won. In its reorganization plan submitted to the court on June 29, Homeplus classified unpaid severance payments totaling 64.9 billion won as public claims. If all union demands are met, labor costs alone would consume approximately 100 billion won, which would disrupt product supply across the 67 stores.

Consequently, industry voices have already raised concerns about the need for follow-up funding to support the 200 billion won DIP. Even within political circles, there are calls such as "at least a campaign to save Homeplus is needed for any chance of recovery." This lends weight to arguments that the current 200 billion won DIP must be utilized to resume operations as much as possible to keep the hope of revival alive. A Homeplus official stated, "We plan to use the 200 billion won DIP injected this time primarily for product supply."

There are also expectations that the success or failure of Homeplus's resumption of operations will be determined in the early days after reopening. An industry official said, "For initial reopening promotions to be effective, it is crucial to have a well-curated product lineup," adding, "To maximize operating performance by early next month, strategies that capitalize on early customer traffic and boost repeat visitation must succeed."

Considering its limited financial resources, Homeplus plans to initially configure store shelves primarily with high-turnover fresh foods and cost-effective PB (private brand) products. The company also intends to benchmark the model of U.S. discount retailer "Trader Joe's," which operates by downsizing existing two-story stores into single-story facilities of about 1,000 pyeong and focusing on profitable food and daily necessities.