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| The Lotte Card headquarters in central Seoul / Yonhap |
Lotte Group is hitting its stride to sell its credit card subsidiary Lotte Card in order to turn the nation's fifth-largest group into a holding company structure.
Several firms have already displayed their interest in acquiring it, citing the card firm's years of posting strong earnings.
Of them, Hanwha Life and Hana Financial Group are said to be frontrunners in acquiring Lotte Card, but the race is now heating up as not only major firms but also private equity funds (PEFs) such as MBK Partners, IMM Private Equity and Hahn & Company have joined the preliminary bidding.
According to Lotte Card, about 10 firms joined the preliminary bidding for Lotte Card Wednesday. Foreign capital Orix PE also joined the bid to acquire Lotte Group's credit card subsidiary.
KB Financial Group has also displayed interest in acquiring the credit card firm, but did not join the preliminary bidding on the day.
Lotte Corp, the group's holding company, currently owns a 93.8 percent stake in Lotte Card. The group said it will sell card firm shares equivalent to the management right level instead of disposing the entire stake.
"Lotte would like to remain as one of the card firm's shareholders even after disposing its management rights," Lotte Group said during a meeting with brokerage analysts in December.
Lotte Group first announced its decision to sell shares for its card subsidiary in November, and the move has since gained market attention because Lotte Card is big and solid enough to transform the nation's credit card industry.
"Hanwha has demonstrated its interest in Lotte Card for quite a while," a Hanwha Group official said, refusing to elaborate further since the bidding is still underway, but expressing hope for synergy with Hanwha Group subsidiaries if the acquisition is made.
Observers say Hanwha could expect synergy with its retailer subsidiary Hanwha Galleria if it acquires Lotte Card. Utilizing the card firm's customer database, Hanwha Galleria is expected to secure a wider range of customer groups.
Hana Financial Group's possible acquisition of Lotte Card could also be a great asset to strengthen its non-banking sectors.
If the group manages to merge its card subsidiary Hana Card with Lotte Card, it will give birth to Korea's third-largest card firm with the asset volume worth 20 trillion won ($18 billion).
Currently, Shinhan and Samsung Card are the nation's top two card firms in terms of asset volume and earnings.
Industry sources said Lotte Group expects about 1.5 trillion won through its sellout of its card subsidiary.
According to the Financial Supervisory Service, Lotte Card posted 1.58 won in sales with a 95.3 billion won operating profit in the first nine months of 2018. The net profit was 70 billion won in the period.
"Lotte Card is a huge company. Even if a big conglomerate like Hanwha or Hana Financial Group acquires the card firm, it takes time to integrate and create synergy with their existing subsidiaries," said a major card firm official who asked not to be named.
"Plus, the industry is expected to face difficulties in earnings since they are required to lower their card transaction fees. The fees are essential in their earnings. We don't know candidate firms' bidding proposal at this point, but we need to monitor the situation further as to how the deal is concluded."
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