* Tesco has had enquiries about S. Korea unit - sources
* Private equity firms seen as keen on the business
* Tesco S.Korea full-year EBITDA about $750 mln - source
* Dunnhumby sale progressing with possible 1 bln stg price (Adds details, reaction)
By Denny Thomas and Prakash Chakravarti
HONG KONG, June 4 (Reuters) - Troubled British retailerTesco has hired HSBC to explore a sale of itsSouth Korean operations, valued at about $6 billion, peoplefamiliar with the matter told Reuters on Thursday.
The appointment of an adviser is Tesco's first concrete steptowards a sale of some Asian assets, which analysts think couldbe its best bet as it looks to cut debt and fund a turnaroundplan at home.
The supermarket group, whose credit rating was cut to "junk"status by Moody's and S&P in January, is battling to recoverfrom an accounting scandal and reverse market share losses inBritain to discount chains Aldi and Lidl.
South Korea is its largest business outside Britain, withmore than 400 stores, 500 franchise stores and more than sixmillion customers a week. The division has attracted several bidenquiries in the past, which has encouraged Tesco to explore aformal sale process, the sources said.
However, some analysts questioned whether it would get agood price.
"It is a forced sell, more of a distressed situation,"Cantor analyst Mike Dennis said.
"Tesco has considerable debts and pension deficits to dealwith, let alone a wish list of things to do to help the UK, butthey are significantly short of cash and selling South Korea orthe Asian shopping malls would be the only two major assets thatare going to get that type of a valuation."
Tesco shares rose as much as 1 percent on the news, buckinga 1 percent drop in Britain's benchmark FTSE-100 Index.
Global buyout firms KKR & Co, Carlyle Group,CVC Partners and TPG Capital Management as well as Asian buyoutfirms including MBK Partners are likely bidders for thebusiness, the sources said.
Tesco, which in December rebuffed interest from Thaibillionaire Dhanin Chearavanont in its other big Asian operationin Thailand, and HSBC declined to comment.
The firms listed as interested parties also declined tocomment, while sources declined to be identified as thediscussions are confidential.
BREATHING SPACE
The potential sale comes after Tesco announced in April oneof the biggest losses in British corporate history, hit by a 7billion pounds ($10.7 billion) write-down.
The 96-year-old group, which has dominated the Britishretail landscape for decades, has paid the price for gettingdistracted by expensive overseas expansion and failing to spotchanging shopping habits at home, as well as the threat fromdiscounters.
Former Unilever executive Dave Lewis, hired inSeptember to lead a turnaround, has cut costs and sought to winback customers with more store staff and improved product availability.
In January he appointed Goldman Sachs to sell Tesco'scustomer data business Dunnhumby. Private equity firms andBritish advertising group WPP are bidders for Dunnhumby,sources close to that process have said.
Two people familiar with the matter said on ThursdayDunnhumby could fetch around 1 billion pounds, with Tescowilling to sell the whole business if it could agree a long-termpartnership with the new owner.
Tesco said in April it had net debt of 8.5 billion pounds,while its net pension deficit had risen to 3.9 billion, forcingit to agree to pay 270 million pounds per year into the schemeto help make up the shortfall.
Espirito analyst Rickin Thakrar said a $6 billion sale ofTesco South Korea would fall short of his 4.5 billion pound ($6.9 billion) valuation and that, while it would diluteearnings due to its high margins, it would afford Tesco somebreathing space.
"That price is not great but at least it would get them outof severe distress and likely junk status," Thakrar said. "Rightnow being junk rated is not good, if interest rates were to goup in the UK they would be in a major amount of trouble."
Including debt, the value of the South Korean business couldbe $10 billion, the sources said.
Tesco's South Korean operations generated 5.38 billionpounds of revenue excluding value-added tax for fiscal 2014/15,a 4 percent drop in like-for-like sales from the previous year,according to its annual report.
They generated about $750 million in earnings beforeinterest, tax, depreciation and amortisation (EBITDA) for theperiod and the business could be sold for seven to eight timesthat figure, one of the sources said.
($1 = 0.6525 pounds) (Additional reporting by Neil Maidment, Pamela Barbagila, KateHolton and James Davey in London; Editing by MuralikumarAnantharaman and Mark Potter)
Tesco (TSCO)
HSBC Holdings (HSBA)
WPP (WPP)
