Seoul-based PEFs likely to acquire Lotte’s financial arms

By Son Ji-hyoung
  • Published : May 3, 2019 - 16:23
  • Updated : May 3, 2019 - 16:23

Two Seoul-based private equity firms have been selected as the most preferred bidders for the respective acquisition of South Korean-Japanese conglomerate Lotte Group’s nonbanking financial arms Lotte Non-Life Insurance and Lotte Card, according to industry sources on May 3.

South Korean PEF Hahn & Co. was the surprising pick for Lotte Card, topping other banking group rivals such as Hana Financial Group and Woori Financial Group-MBK Partners consortium.

Hahn & Co. has reportedly valued the company at roughly 1.8 trillion won ($1.5 billion). The PEF with some $3 billion assets under management -- the second-largest in Korea following MBK Partners -- is willing to buy some 80 percent stake in Lotte Card, while Lotte subsidiaries will become minority stakeholders. Currently, its holding firm Lotte Corp. and Lotte Capital own a combined 98.37 percent stake.

The news beat market anticipations that either Hana or Woori would take control of the company to strengthen their credit card business in their race to ramp up assets.

Lotte Insurance and Lotte Card headquarters in Seoul (Lotte)
Meanwhile, another PEF JKL Partners became the preferred bidder for Lotte Life Insurance, beating contenders such as MBK Partners and Hahn & Co.

JKL Partners, which manages funds valued at some 1.6 trillion won, is reportedly willing to pay some 800 billion won for a 52.47 percent stake plus potential paid-in capital in the future.

It will buy Lotte Non-Life Insurance’s majority stake from Hottel Lotte, Hotel Lotte Busan and Lotte Station B/D.

Market watchers expect the transactions to be completed in the third quarter this year, followed by months-long due diligence.

The news triggered a stock price fluctuation of Lotte’s Seoul-based insurer, trading on the main bourse Kospi. Soaring as high as 9.5 percent in early morning trading, Lotte Non-Life Insurance saw its gains evaporate through the morning, ending 0.6 percent lower. Lotte Card is a privately held company.

The deal comes amid Lotte Group’s need to comply with fair trade regulations, as the end to the two-year transition period for it is drawing near. Lotte employed a holding company structure in November 2017 by turning Lotte Confectionery into the Korean holding firm Lotte Corp., in addition to Japanese holding firm Lotte Holdings. To be eligible as a nonfinancial holding company in Korea, Lotte is obliged to sell off stake from financial units, as stipulated by Korea’s Monopoly Regulation and Fair Trade Act.

In February, Lotte said it was holding off plans to sell its other financial arm Lotte Capital for the time being.

By Son Ji-hyoung (