Lotte Group beats Shinsegae to acquire Ministop Korea

Lotte Group beat its retail rival Shinsegae Group in a competition to buy South Korea’s fifth-largest convenience store chain Ministop Korea. The acquisition is expected to help Lotte take on leaders in the country’s convenience store industry.

Aeon Co., Japan’s retail and financial services group, and Samil PwC, the manager of Ministop Korea’s sale, selected Lotte as a final preferred bidder for the 100% stake in the convenience store operator, according to investment banking sources on Monday. Aeon and Samil PwC were slated to notify the decision this week.

Lotte was known to have made a bid for Ministop Korea at around 300 billion won ($251.7 million), far higher than other bidders – Shinsegae and a consortium between Anchor Equity Partners and Nepstone Holdings Co., a medium-sized food materials supplier, that were understood to have proposed about 200 billion won each.

Lotte joined the race through its Korea Seven, a licensee that runs the 7-Eleven convenience store chain, while Shinsegae participated in the competition through E-Mart 24.

MORE STORES FOR ECONOMIES OF SCALE, LOGISTIC HUBS

Ministop Korea is expected to help Lotte flex its muscle in its competition with larger convenience store rivals. Lotte is the No. 3 player with 11,173 outlets nationwide after GS25 and CU that operate about 15,000 stores each as of the end-2021. Lotte is slated to add the number of stores with 2,620 outlets run by Ministop Korea.

In the convenience store industry, the number of stores is a decisive factor for economies of scale, which usually improve its bargaining power with suppliers and cut logistics costs.

Lotte is predicted to utilize Ministop Korea’s outlets as distribution hubs or warehouses to improve last-mile delivery services. The retail giant has already been utilizing its offline presence, including 7-Eleven's convenience stores, as pick-up locations for its online customers. It seeks to transform some of its hypermarkets into logistic centers in cities. Ministop Korea’s outlets are usually larger than other convenience stores, which are easier to be used as logistic centers, industry sources said.

The deal was successful to Aeon since it was known to sell the South Korean unit at 300 billion won, industry sources said.

Aeon attempted to sell the arm in 2018 but failed due to a wide price gap with bidders. At the time, both Lotte and Shinsegae were among the final bidders, along with Glenwood Private Equity.

In 2020, Ministop Korea turned to an operating loss of 14.3 billion won on sales of 1.1 trillion won. That compared with an operating profit of 4.6 billion won and sales of 1.2 trillion won posted in 2018.

“It was fortunate that the sale was made. Aeon took successfully the funds back by utilizing the local convenience store sector’s competition structure,” said an IB industry source.

Write to Jun-Ho Cha, Si-Eun Park and Yoo-Chung Roh at chacha@hankyung.com
Jongwoo Cheon edited this article.