The Seoul Bankruptcy Court in South Korea has approved the pursuit of a merger and acquisition (M&A) deal by discount store chain Homeplus before a court ruling on its rehabilitation plan.

The move is designed to facilitate the repayment of creditors and secure employment for the company's workforce.

The court's approval allows Homeplus to select an M&A adviser and proceed with the deal, ensuring terms that are favourable to all parties, including creditors and employees.

Homeplus, which filed for corporate rehabilitation in March 2025, must submit its rehabilitation plan by 10 July.

The decision to allow the chain to engage in an M&A deal comes after its corporate bonds were downgraded due to financial health concerns.

Samil PricewaterhouseCoopers, a court-appointed accountancy company, has been recommended to oversee the sale process, which is expected to take two to three months.

MBK Partners, the private equity company that owns Homeplus, has committed to supporting the sale and plans to write off Won2.5tn ($1.83bn) worth of common shares, as reported by Reuters.

The court's statement highlighted the benefits of the sale, which include channelling funds into the company, repaying debts and avoiding bankruptcy to protect partner companies.

Following Homeplus' request for court-assisted rehabilitation, MBK Partners has faced scrutiny from various regulatory authorities.

The National Tax Service has initiated a tax probe while the Korea Fair Trade Commission is investigating potential insider trading involving MBK Partners, Homeplus and Lotte Card, a local card issuer.

The Financial Supervisory Service (FSS) is examining MBK Partners' role in the issuance of short-term bonds for Homeplus, amid concerns that it may have been planning the court-led rehabilitation covertly.