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Korea’s Lotte Group envisions making logistics its next core area after retail

Korea’s Lotte Group plans to acquire Hyundai Logistics Co and merge it with Lotte Logistics Corp. with an ambition to have the merged entity go public on the main bourse in a few years and make logistics its core business along with retail.

An official at Lotte Group who declined to be named on Thursday said “We will push forward with an initial public offering (IPO) (of the merged entity) after we purchase Hyundai Logistics and enhance the corporate value.” The official also added that the group would increase its stake in Hyundai Logistics without the assistance of strategic investors.

Early this month, Lotte announced a plan to buy a controlling stake in Hyundai Logistics through its eight affiliates and invite some strategic investors to the deal, but it changed its stance and decided to use its own funds without external help.

The group initially said seven Lotte companies plan to chip in to obtain a 71.7 percent stake in Hyundai Logistics at 506.9 billion won ($430 million). According to the plan, Lotte Chemical Corp. plans to buy a 21.9 percent stake for 155 billion won; 4.5 percent for Lotte Chilsung Beverage Co.; 4.9 percent for Lotte Food Co.; 4.5 percent for Lotte Confectionary Co.; 13.9 percent for Lotte Logistics; 4.5 percent for Lotte Shopping Co.; 17.4 percent for Hotel Lotte Co. Lotteria Co. will likely soon announce its participation in the takeover.

Lotte is also considering asking Japan-based Orix Private Equity that used to have management control of Hyundai Logistics to maintain its minor stake as a financial investor, which could allow Lotte and Orix to hold a total 88.8 percent stake estimated at 620 billion won when the acquisition is completed by July. Such an aggressive move by Lotte reflects its ambition to be a retail and logistics behemoth.