South Korean retail conglomerate Shinsegae Group finalized an investment contract worth 1 trillion won ($880 million) with a foreign investment firm and a private equity firm on Wednesday for an e-commerce spinoff. 

According to Shinsegae Group, it signed the contract with Affinity Equity Partners and BRV Capital Management, a consumer-focused investment firm, following its signing of a memorandum of understanding with the two companies in January.

Shinsegae said some 700 billion won will be first put into launching a new e-commerce unit, while an additional 300 billion won will be injected in the second phase. 

The group aims to spin off its online business division of Shinsegae Department Store and its discount store chain operator E-mart and combine their online business units to launch a separate company within the first half of the next year. 

Chung Yong-jin, Shinsegae Group vice president, said it targets to create the new firm as the business group’s key distribution channel, with annual sales increasing fivefold to 10 trillion won by 2023. 

“While the growth of Shinsegae Group heavily dependent on the performance of Shinsegae Department Store and E-mart, the future growth (of the group) will be led by our new e-commerce unit,” said Chung in a statement. 

“By focusing all our effort, we will develop the new e-commerce unit as our main retail channel that can beat the department store and E-mart,” he added.

The group said it will hold an extraordinary general shareholders meeting in December to gain approval for the plan to create the division. 

Currently, Shinsegae operates its online stores for E-mart and Shinsegae under SSG.com. Its combined sales hit 1.05 trillion won with operating profit of 900 million won in the first half of this year. 

By Kim Da-sol (ddd@heraldcorp.com)