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Lotte Group seeks to create synergy through Ministop Korea acquisition Lotte's convenience store chain to have 14,000 stores nationwide

Translated by Kim So-in 공개 2022-01-20 08:12:39

이 기사는 2022년 01월 20일 08:08 더벨 유료페이지에 표출된 기사입니다.

Market insiders are paying attention to whether Lotte Group, a prospective buyer of Ministop Korea, will be able to boost the competitiveness of its convenience store business after the possible acquisition.

Lotte Group is considered one of the strongest candidates to buy Ministop Korea, industry sources said on Tuesday. Samil PwC, which is handling the sale, is expected to select a preferred bidder soon. Lotte Group has reportedly offered about 300 billion won ($251 million) to acquire 100% of Ministop Korea from Japan’s Aeon Group.

“We have not been officially notified that we have been selected as the preferred bidder for Ministop Korea,” an official at Lotte Group said.

The race to acquire Ministop Korea was initially expected to be led by Emart24, the convenience store chain of Shinsegae Group, and private equity firm Anchor Private Equity, but Lotte Group joined the final round of bidding. The retail conglomerate was one of the suitors for the convenience store chain when Aeon Group made the first attempt to sell the asset four years ago, although the sale was ultimately called off in 2018.

Lotte Group’s convenience store chain Korea Seven is set to become one of the top three convenience store chains in the country with 14,000 stores upon the completion of the acquisition.

With an increase in the number of stores, Lotte Group will be able to have a greater negotiating power when ordering products and reduce logistics costs, which will ultimately boost the competitiveness of its convenience store business.

“With an increase in the number of stores, there would be a saving in overall costs,” said a convenience store industry source. “In particular, as the concentration of store increases, the efficiency will be further improved.”

The possible acquisition of Ministop Korea will create stronger synergy among Lotte Group’s affiliates. Lotte Shopping is carrying out business restructuring to maximize synergies between its online and offline channels, partly through reestablishing logistics networks owned by its retail divisions.

If Lotte Group uses the convenience store channel as a last-mile delivery base after the acquisition, retail affiliates will be able to build tighter logistics networks. At the same time, Korea Seven may go public when the convenience store business gains steam thanks to synergies with affiliates.

Ministop Korea has some 2,600 stores nationwide, but franchisees have to maintain their contracts with the headquarters for Lotte Group to achieve its goal. Industry sources said it will require extra investments to keep franchisees from terminating their contracts.

It is also unclear whether the integration of Lotte’s 7-Eleven and Ministop will go smoothly. It took 10 years for Korea Seven to completely integrate Buy the Way convenience store chain it acquired in 2010.

Ministop Korea was hit by the pandemic. It recorded an operating loss of 14.3 billion won and a net loss of 13.8 billion won in the fiscal year ended on February 28, 2021 on revenue of 1.1 trillion won, down 4.2% year-over-year. (Reporting by Hyo-beom Lee)
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