Snack-maker Orion Group is sizing up whether to bid for grocery retail giant Homeplus, it was reported Monday.

However, the news made little impression on analysts who consider South Korea’s second-largest supermarket chain to be too large for Orion, which has undergone restructuring to reinforce its financial health.

According to market sources, the producer of some of the country’s best-selling confectionaries, including the Choco Pie and Market O Real Brownie, has recently received an investment manual from HSBC, which is overlooking the sale of Homeplus. Orion has reportedly appointed Nomura Financial Investment to consult on the primary bidding for the merger and acquisition deal expected to kick off in late June.

Much of the money is expected to come from the public share offering of its Chinese unit, as well as the sales of treasury stocks, and industry sources said that the company was considering inviting private equity funds to join it in its bid.

“If Orion makes it into the retail distribution business, it could create synergy with the confectionary manufacturing division. The company could also benefit from the plots of real estate Homeplus has,” a sources said.

The appointment of former E-Mart president Hur Inn-chul as its vice president late last year proves the company’s ambition, observers say.

“Hur in 2006 led the acquisition of Walmart Korea by Shinsegae Group, the mother company of E-Mart, which helped the discount store cement its No. 1 market position. He is expected to perform that magic once again,” an analyst said.

Orion said nothing was yet certain.

“It is true that we have received an IM, but it doesn’t mean we would participate in the actual bidding. We are always considering various mergers and acquisitions, and Homeplus is one of many options at this moment,” an Orion spokeswoman said. 

IBK Securities said, however, that Orion may not be able to afford Homeplus, which is valued between 5.2 trillion won ($4.7 billion) and 6.5 trillion won. “The liquidity of Orion is about 290 billion won, far smaller than Homeplus’ value. The gap is too big and the acquisition is unlikely,” Park Chan-eun, an IBK analyst reported.

Homeplus was established in 1999 by British retail giant Tesco and Samsung C&T. Since the expiration of their joint venture contract, Tesco solely owns the store chain. The company reported 8.9 trillion won in sales and an operating profit of 340 billion won in 2014. It is rumored to have been put on the market earlier this month to help its British parent company’s fiscal health.

Large domestic retailers, such as GS Retail, Hyundai Department Store and NongHyup, as well as private equity firms like KKR or Carlyle, have been rumored to be interested in the deal.

Homeplus refused to confirm any rumors regarding to the merger deal.

By Bae Ji-sook (baejisook@heraldcorp.com)