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| Lotte Group Chairman Shin Dong-bin participates in a Value Creation Meeting held at the company's headquarters in Seoul on Jan. 13. Courtesy of Lotte Group |
By Kim Jae-heun
Lotte Group's retail unit, Lotte Shopping, has been selected as a de-facto strategic investor to acquire Hanssem, the country's largest furniture company, along with local private equity fund (PEF) IMM PE.
Lotte Shopping will also obtain the preemptive right to take over the furniture company when the PEF sells it. Lotte Shopping and IMM PE are said to have agreed to meet and sign a stock purchase agreement next week.
"Our board of directors made a decision to invest 300 billion won in a private equity fund to be established by IMM PE to acquire Hanssem," a Lotte Shopping official said. "In order for the investment to actually take place, IMM PE has to proceed with its plan first. If not, we will not transfer the money."
Investment banks here predict that IMM PE and Lotte Shopping will have to pay a maximum 1.5 trillion won to acquire 30.21 percent of Hanssem's controlling stake owned by Cho Chang-geol, the honorary chairman of Hanssem, and affiliated persons.
Lotte Shopping will acquire 5 percent to 6 percent of Hanssem's share if it invests 300 billion won as planned.
Its retail subsidiary expects to create synergy with its department stores and Hanssem after the deal is closed.
Hanssem is the No. 1 interior design company in Korea and could help Lotte Shopping strengthen its competitiveness in the furniture market.
"Taking over Hanssem will help Lotte allocate space for furniture stores in our retail channels as well as create synergy at the group level in collaboration with Hi-Mart and Lotte Engineering and Construction," a Lotte Shopping official said.
LX Hausys, another industrial and interior material giant, also showed strong interest in IMM PE's Hanssem buyout ― as acquiring the furniture firm could help it grow into a general interior firm. However, IMM PE chose Lotte over LX Hausys after reviewing various conditions offered.
Lotte Group's main rival, Shinsegae, was also rumored to have reviewed investing in Hanssem, but decided to drop out.
Lotte Group has been quiet in the merger and acquisition scene in the first half of the year ― its last acquisition was in 2015 when it took over KT rental and a Samsung chemical affiliate.
