Lotte Group begins business structure reorganization

[Courtesy of 7-Eleven]

South Korea’s Lotte Group began a full-scale reorganization of its business structure, as the business conditions in its mainstay retail and chemical sector deteriorate. The move comes after the company’s chairman Shin Dong-bin recently raised the need for a restructuring to improve the group’s overall business structure.

According to sources from the capital market industry on Tuesday, Lotte Group recently began to improve the business structure of Korea Seven Co., which operates the 7-Eleven convenience stores, in collaboration with Kohlberg Kravis Roberts & Co. (KKR), a top three global private equity firm.

A part of its efforts to spin off Korea Seven’s automated teller machine (ATM) business (formerly Lotte PS Net), Lotte appointed Samjong KPMG LLC as the organizer of the sale and is looking for a buyer for the business, valued between 40 billion and 50 billion won ($37.68 million). Lotte attempted to sell off Lotte PS Net, then a subsidiary of Korea Seven, in 2017, but the ensuing difficulties, saw Korea Seven absorb Lotte PS Net via a merger in 2019.

This is the first time Lotte has partnered with KKR to restructure its business. KKR’s expertise is highly regarded, particularly in the retail sector, including its successful acquisition and resale of Oriental Brewery Co. It is not yet known whether KKR will participate as a shareholder in Korea Seven or invest via a private equity loan.

The group previously worked with MBK Partners Ltd. for the sale of Lotte Card Co. and Lotte Insurance Co.

Lotte is also looking to restructure other businesses. It has put up five underperforming Lotte Mart stores for sale and is considering revitalization strategies for smaller regional department stores. The group is also known to be looking to sell unprofitable golf courses and resorts to improve its overall financial structure.

“We have acquired about 60 companies, large and small, but we are now changing our policy to not only buy but also sell,” Shin said in a recent interview with Japanese media. “We will sell a few more companies moving forward as selling businesses that have not done well for years is likely a better deal for employees.”