Homeplus' bid process for its corporate supermarket (SSM) chain Express has entered a new phase. With 2 prospective buyers participating, MGC Global, operator of Mega MGC Coffee, is being mentioned as a new acquisition candidate.

Industry sources said 2 prospective buyers are known to have submitted letters of intent (LOIs) for the acquisition of Homeplus Express on March 31. Homeplus is not disclosing the participating companies or details such as terms. It is also said the company remains open to accepting additional submissions.

The participation of multiple prospective buyers is positive for Homeplus in that it has eased concerns about a failed sale. That is because a competitive bidding structure has formed even as the expected price has fallen from about 1 trillion won to about 300 billion won. Still, some assessments say it is difficult to view the outcome as a success because major retailers that had been mentioned as initial candidates did not translate into actual participation.

Against that backdrop, market interest is growing as MGC Global is being mentioned as a candidate. MGC Global said it cannot disclose details, but it is not denying participation in the bidding process itself. Industry watchers are citing, among the reasons for its involvement, a strategy to expand its business scope into retail beyond Mega Coffee.

The market had previously mentioned GS Retail, Lotte Shopping, Kurly and Harim Group as candidates, but they are said not to have followed through with actual participation. By contrast, as MGC Global, a cafe franchise operator, rises as a candidate, a view is also gaining ground that Express is being seen less as a traditional SSM business and more in terms of an urban store network and logistics bases.

A notable point in this sale process is the appearance of an unexpected prospective buyer. The industry is focusing on the possibility that MGC Global, operator of Mega MGC Coffee, may be viewing Express more as a way to secure an urban store network and distribution touchpoints than as an SSM business in itself.

Homeplus in fact emphasised Express' competitiveness as a quick-commerce base just days before the LOI deadline. According to Homeplus, Express, based on its 293 stores nationwide, recorded quick-commerce sales growth in the 60 percent range over four years, and earnings before interest, taxes, depreciation and amortisation (EBITDA) in the 7 percent range.

Of the 293 Express stores, 223 are being used as quick-commerce delivery bases. More than 90 percent of all stores are located in densely populated areas such as the Seoul metropolitan area and major cities, an analysis says, giving the structure of an offline store that can also be used as a logistics base.

The industry also assesses that if existing distribution companies move to acquire Express, the pros and cons are clear. First, Express' existing store operations experience, product sourcing capabilities and logistics systems are attractive to distribution companies. The view is that quick-commerce capabilities could be strengthened after an acquisition as Homeplus moves to boost value, and integrated operations with existing businesses could be relatively smooth.

Still, the burden that must be shouldered after an acquisition is also not small. In quick commerce, it is important to have infrastructure that links offline stores with delivery and logistics systems, and even if Express is acquired, a new IT-based logistics infrastructure must be built. Observers say this process could create an initial investment burden.

Overlapping trade areas are also seen as a burden. Because existing distribution companies such as GS Retail and Lotte Shopping, which were mentioned as candidates, have SSM stores that, like Express, are mostly located in the Seoul metropolitan area, there is a view that overlapping trade areas would arise. Companies that had been on the candidate list cited this as the biggest barrier related to acquiring Express.

Meanwhile, some in the industry say it is too early to be optimistic that the sale will be completed based on multiple LOIs. In November last year, in Homeplus' pre-court approval merger and acquisition process, Harex Infotech and Snowmad submitted LOIs but did not participate in the final bidding.

An industry official said, "The outcome of the LOI submission deadline has resolved some concerns for now," but added, "It is still difficult to be optimistic, as existing major retailers were negative about acquiring Express due to issues such as overlapping trade areas and cost burdens."