Oct. 19 (Bloomberg) -- Lotte Shopping Co., South Korea’s biggest department-store owner, agreed to buy control of Times Ltd. to gain 66 outlets in China, beating Wumart Stores Inc., two people with knowledge of the matter said.
In a deal valuing Times at about $625 million, Seoul-based Lotte Shopping will purchase a 72.3 percent stake in Times from Chairman Kenneth Fang for about HK$5.50 per share and will make an offer for the rest of the company, the people said, asking not to be identified because the talks are private. The offer is 19 percent higher than Times’s last traded price.
The deal is the biggest acquisition in China by a Korean company, according to data compiled by Bloomberg. Lotte Shopping, which operates a department store in Beijing, will turn itself into “a major hypermarket player in Eastern China” with the purchase, according to Bank of America-Merrill Lynch & Co. analysts Young-Ah Han and CJ Yun.
“Given the slower growth in the domestic retail industry, mergers and acquisitions in China will boost the market’s expectation for Lotte Shopping’s long-term growth,” CG Koo, a Samsung Securities Co. analyst, said in a note to clients today.
Lotte Shopping fell 0.8 percent to close at 303,500 won on the Korea Exchange, while the mainboard Kospi gained 0.5 percent. The stock has gained 45 percent this year.
Times may announce the deal as early as today, the people said. Fang was unavailable for comment today and hasn’t returned calls seeking comment.
‘Final Stage’
“We are currently in the final stage of talks with a positive stance, but we have no information on the size or the value of the stake,” said Lee Sun Dae, a spokesman for Lotte in Seoul.
Wumart, Beijing’s biggest supermarket chain, said Sept. 24 it has held talks with Times. Shares in Times were suspended on Oct. 12 in Hong Kong after rising to a two-year high, taking its market value to $523 million.
Lotte Shopping said Oct. 16 in a regulatory filing that it plans to invest an additional 732.7 billion won ($622 million) in its Hong Kong unit, which will use the proceeds to expand in China and Hong Kong.
With South Korean “department and discount store businesses maturing, a new growth driver must be found, Merrill Lynch analysts Han and Yun said in a note to clients dated Oct. 16. “Venturing abroad does not seem to sit well with investors for now as they are skeptical of the eventual return.”
Additional Stores
Acquiring Times would give Lotte Shopping 53 hypermarkets and 13 supermarkets in the world’s fastest-growing major economy. The retailer currently has 10 Lotte Mart discount stores in China and operates a department store in Beijing with Intime Department Store (Group) Co.
Rival Shinsegae Co. has 22 E-Mart discount stores in China and last year said it planned to increase its outlets in the country to 100 by 2014.
Nomura Holdings Inc. is advising Lotte Shopping and HSBC Holdings Plc represents Times. Annie Cheng, a spokeswoman at HSBC, declined to comment. Nomura spokesman Matthew Russell didn’t return an e-mail seeking comment.
Parent Lotte Group is expanding in China, India, Vietnam, Indonesia and Russia, seeking to tap rising affluence in developing markets. Lotte Shopping opened its first overseas department store in Moscow in 2007 before its Beijing outlet.
Lotte Confectionary Co. owns 39 percent of Vietnam’s Bien Hoa Confectionery Joint-Stock Co., the candy maker that’s also known as Bibica, according to data compiled by Bloomberg. Lotte Shopping acquired 49 percent of CTA Makro, which operates supermarkets in Beijing and Tianjin, in 2007 and bought the remainder the following year.
Lotte began as a Japanese gum maker set up by Chairman Shin Kyuk-Ho after World War II. Shin, 87, still spends half his time in Japan, where his closely held Lotte Co. operates.
