South Korea’s conglomerate Lotte Group plans to buy a controlling stake in Hyundai Logistics, as it seeks to strengthen its delivery service to compete with other rival retailers.
By the end of next week, eight affiliate companies of Lotte are set to hold board of directors meetings to get approval to buy an 88.8 percent stake in Hyundai Logistics in separate deals with an estimated value about 410 billion won ($351 million), according to Lotte officials. They expect to complete transactions within this year.
“We’re giving consideration to buy the stakes by attracting one or two strategic investors,” an official at the group said.
Among the group’s affiliates, snack maker Lotte Confectionary was the first to make such a move.
The group’s confectionary unit said it agreed to buy a 4.52 percent stake in Hyundai Logistics from Igis I Corporation for 3.2 billion won to “boost competitiveness of logistics operating system,” according to a regulatory filing on Tuesday.
Igis I Corporation, which owns 88.8 percent of Hyundai Logistics, is a special purpose company established in 2014 by a consortium formed by Lotte’s affiliates, Hyundai Merchant Marine and Japan’s commercial finance company Orix, with their stake in the logistics firm at 35 percent, 30 percent and 35 percent, respectively.
Lotte had included a “call option” that allowed the firm to buy back the entire stake at a later date when it sets up Igis I Corporation.
“The deal highlights that Lotte will have a direct ownership of Hyundai Logistics, unlike indirect ownership through the special purpose company, by exercising the call option,” another Lotte official said.
Taking the controlling stake in the logistics company would help the retail giant to reinforce its delivery process to quickly move goods to the doorsteps of customers.
Lotte also expects that its existing logistics unit Lotte Logistics could create synergy with Hyundai Logistics by providing a more integrated delivery network for customers.
By Park Han-na (hnpark@heraldcorp.com)