Lotte buys GS retail outlets

GS Retail said yesterday Lotte Group has agreed to buy GS Retail`s department stores and discount store chains for 1.34 trillion won ($1.15 billion).

The retailer said that the three GS Square department stores and 14 GS Mart operations will be handed over to Lotte Shopping, the nation`s No. 2 retail unit under Lotte Group.

Under the agreement, 2,600 employees of GS Mart and GS Square will continue to work as Lotte Shopping employees and their employment will be guaranteed for at least four years, GS Retail said.

The sale of department and discount store chains will reduce GS Retail`s debt-to-equity ratio to the 80 percent level from the current 140 percent, the company said.

For Lotte`s part, the acquisition increases Lotte`s number of department stores to 33 from 30, which could raise the No. 1 department store`s market share to over 45 percent from the current 43-44 percent, analysts had earlier predicted. No. 2 Hyundai Department Store currently has 11 outlets.



In the discount store chain industry, Lotte`s acquisition of GS Mart operations will increase Lotte`s outlets to 84 from 71, trailing E-Mart with 127 stores and Homeplus with 115 stores, they said.

According to GS Retail, combined revenues of GS Square department stores were 795 billion won in 2009, and those of GS Mart stores, 575 billion won.

"Lotte Shopping`s acquisition of GS Retail`s stores had been predicted and the acquisition price was within the market forecast. Lotte will see some synergy effect in improving profit margins," said Koo Chang-gun, analyst with Samsung Securities. "The acquisition will be slightly positive to other rival retailers like Shinsegae as well," he said.

Lotte Shopping`s shares rose 2.6 percent to 313,500 won yesterday.

(yoonmi@heraldm.com)



By Kim Yoon-mi