CONTENTS
- 1. Corporate Sale | Homeplus Express Emerges as a Variable in Rehabilitation
- - The Last Opportunity to Demonstrate the Feasibility of the Sale
- 2. Corporate Sale | Structure and Types
- - A Restructuring Strategy Used in the Course of Corporate Rehabilitation
- - The Court's Criteria for Determination
- 3. Corporate Sale | Sale Strategies a Company Must Review
- - Designing the Sale Structure
- - The Importance of Reviewing the Structure in Advance
- - Comprehensive Legal Advisory
1. Corporate Sale | Homeplus Express Emerges as a Variable in Rehabilitation
Cases are emerging in which a corporate sale plays an important role in the course of corporate restructuring.
Homeplus, which is currently undergoing corporate rehabilitation proceedings, secured additional time for restructuring after the deadline for approving its rehabilitation plan was extended by two months.
The Seoul Rehabilitation Court extended the period for approving the Homeplus rehabilitation plan until May 4, and the major shareholder, MBK Partners, decided to inject 100 billion won in emergency operating funds (DIP financing).
These funds are expected to be used first to resolve urgent debts, such as overdue employee wages, and the court is reported to have determined that this injection of funds would not be significantly disadvantageous to interested parties.
The Last Opportunity to Demonstrate the Feasibility of the Sale
However, many in the industry assess this decision as a measure that secures time rather than one that signifies the company's return to normal operations.
In fact, analyses suggest that whether Homeplus can be rehabilitated depends heavily on whether the sale of the Homeplus Express business division can be completed.
Homeplus Express is an SSM (super supermarket) business based on short-distance commercial areas centered on densely populated residential neighborhoods, and because it has a relatively stable revenue structure, the market has assessed it as a "profitable business division."
It carries a lower fixed-cost burden than large discount stores and is drawing attention as a business division for sale, in that its format also aligns with the recent consumption trend of increasing demand for small-volume and short-distance purchasing.
That said, the sale is not necessarily an easy matter.
A sale of Express was also pursued in 2024, but it fell through after no acquirer could be found because of an enterprise value assessed at approximately 1 trillion won.
The sale price is reportedly now lower, to a level of approximately 300 billion won, but there are also forecasts that securing a buyer will not be easy because of the downturn in the retail sector and the tightening of the investment market.
Ultimately, the next two months given to Homeplus are assessed as the last opportunity to demonstrate the feasibility of completing the sale of the business division.
2. Corporate Sale | Structure and Types
A corporate sale is a restructuring method in which a company sells the businesses or assets it holds to a third party in order to improve its financial structure or reorganize its business structure.
The representative types of corporate sale are as follows.
- Sale after carving out a business division (carve-out sale)
- Sale of subsidiary shares
- Sale of specific business assets
- Sale of the entire company (M&A)
- Sale of assets for restructuring purposes
Through a sale, a company can secure an inflow of cash and reduce its financial burden, while at the same time creating a structure that allows it to concentrate on its core business.
In rehabilitation proceedings in particular, such a corporate sale is often used as a key means of securing liquidity and as a debt-repayment strategy.
A Restructuring Strategy Used in the Course of Corporate Rehabilitation
A corporate sale is one of the most representative restructuring methods in rehabilitation proceedings.
When a company enters rehabilitation proceedings, the court compares the company's going-concern value with its liquidation value to determine the prospects for rehabilitation.
When the going-concern value is determined to be higher, a method of adjusting the debt structure while maintaining the business is selected.
In this process, the following restructuring strategies are used together.
- Sale of non-core business divisions
- Asset securitization
- Debt-to-equity swap
- Attraction of investment
- Reorganization of the business structure
The sale of non-core business divisions in particular is assessed as the most realistic restructuring method for securing cash within a short period.
In the Homeplus case as well, when a sale of the entire company became difficult, the method of separately selling the Express business division was presented as an alternative.
The Court's Criteria for Determination
In the course of corporate rehabilitation, the court considers the following criteria when reviewing a restructuring plan.
- Feasibility
Whether the restructuring plan can actually be carried out is an important criterion for determination. - Protection of creditors' interests
The likelihood of creditors' recovery through restructuring must be higher than through liquidation. - Maintenance of enterprise value
Whether structural improvement is possible while maintaining the competitiveness of the core business is important. - Financial-structure improvement effect
Whether the company's financial stability is secured after restructuring is a criterion for determination.
3. Corporate Sale | Sale Strategies a Company Must Review
The Homeplus case is a representative example showing that a corporate sale can become a key strategy in corporate restructuring.
Because a corporate sale is a transaction in which enterprise value and various interests are complexly intertwined, strategic structural design is required in advance.
Designing the Sale Structure
When a company pursues the sale of a business division, it should review the following structures.
- The method of separating the business division (carve-out structure)
- Share sale vs. asset sale
- Whether creditor consent is obtained
- Responding to acquirer due diligence
- Contract structure and price negotiation
When rehabilitation proceedings are underway in particular, the design of the sale structure becomes even more important because the interests of the court and the creditors operate simultaneously.
The Importance of Reviewing the Structure in Advance
For a corporate sale to proceed smoothly, the following factors need to be reviewed in advance.
If these factors are not resolved, the likelihood that the transaction will fall through during the buyer's due diligence process also increases.
Strategies for Managing Corporate Restructuring Risks
Management Area | Key Management Methods | Points for Companies to Note |
Business structure | Distinguishing core from non-core businesses | Reviewing whether the sale of a non-core business division would impair enterprise value |
Financial structure | Analysis of the borrowing structure and cash flow | Establishing a plan for using the sale proceeds in advance |
Contract structure | Organizing key contractual relationships | The transaction structure may differ depending on whether contracts are succeeded to |
Personnel structure | Reviewing organizational separation and personnel transfer | A review of labor-law risks is needed in advance |
Creditors | Analysis of security interests and creditors' rights | Whether creditor consent is obtained affects the success or failure of the transaction |
Attraction of investment | Reviewing a strategic investor (SI) or a financial investor (FI) | Considering the likelihood of completing the transaction depending on the investment-market environment |
Comprehensive Legal Advisory
When rehabilitation proceedings are underway, creditors' rights, the security structure, contractual relationships, personnel issues, and tax issues operate in combination, so a strategic approach that simultaneously considers the legal, financial, and business structures is required.
The M&A attorneys, corporate attorneys, and insolvency attorneys of Daeryun Law Firm LLP comprehensively analyze a company's financial structure and business structure and review various restructuring strategies, such as the sale of a business division, the sale of assets, and the attraction of investment.
They also provide legal advice on the entire process arising during rehabilitation proceedings, including creditor negotiations, the design of the sale structure, responding to acquirer due diligence, the conclusion of contracts, and the court approval procedure.
Establishing a restructuring strategy at the early stage when the financial structure is deteriorating can be far more effective than responding after a corporate crisis has materialized.
If you are in a situation that calls for a corporate restructuring or corporate sale strategy, you are welcome to review specific directions for your response through the 🔗M&A Attorney Legal Consultation Booking.
