MARK BLINCH/Reuters
Two Canadian pension plans are part of a consortium that purchased South Korean supermarket chain Homeplus from British retailer Tesco for US$6.1-billion on Monday.
The Canadian Pension Plan Investment Board said it spent US$534-million for a 21.5 per cent stake in the company.
The Public Sector Pension Investment Board, which manages investments for the federal public service and the Canadian Forces among others, was also a part of the deal but did not disclose its contribution.
The deal is expected to close in the fourth quarter of 2015, pending approval from the South Korean government and Tesco's shareholders.
Homeplus is South Korea's second-largest retailer, with more than 1,000 outlets across the country. It was originally founded as a joint venture between Samsung and Tesco in 1999.
The sale of Homeplus, its largest overseas asset, represents the first large divestment by Tesco boss Dave Lewis, who wants to slash debt and rid the firm of its junk credit rating after its profits were battered by market share losses to discounters Aldi and Lidl in Britain and by an accounting scandal.
It follows Tesco's costly exits from Japan and the United States, as well as a reduction of its exposure to China, under previous management and highlights the difficulty Western retailers have had away from their home markets.
"This sale realizes material value for shareholders and allows us to make significant progress on our strategic priority of protecting and strengthening our balance sheet," said Lewis, a former Unilever executive who was hired last September to lead Tesco's turnaround.
Under the terms of the largest-ever private equity transaction in Asia, Tesco will receive 4 billion pounds ($6.1-billion) in cash. After adjustments for tax and transaction costs, the net cash proceeds, to be received in a combination of U.S. dollars and Korean won, will be around 3.35 billion pounds.
Tesco said the Homeplus disposal would reduce its total indebtedness, which stood at 21.7 billion pounds as of end-February 2015, by 4.225 billion pounds.
South Korean private equity firm MBK Partners led the deal and said the consortium will invest US$831-million in the business over the next two years.
Canada's national pension plan makes more than it currently pays out in benefits, and the CPPIB invests the excess money. At the end of June, the fund totalled $268.6-billion.
Homeplus is facing criminal and civil lawsuits in South Korea after company executives including CEO Do Sung-hwan were indicted in February for selling the personal data of millions of customers to insurance companies for marketing purposes.
With files from Reuters