Sale of Kim's Club fails to draw interest
By Lee Hyo-sik
Park Sung-su, E-Land Group chairman
E-Land’s sale of its supermarket chain failed to draw much interest from either retailers or financial investors amid continuing sluggish domestic consumption.
Despite the inability of Kim’s Club to attract bids from Lotte, Shinsegae and other local retailers, E-Land Group, headed by Chairman Park Sung-su, plans to push the sale forward as scheduled. Sales manager Goldman Sachs said it will hold a bid this week and announce a preferred bidder.
According to industry analysts Sunday, U.S. private equity fund Kohlberg Kravis Roberts (KKR) will likely be the only entity taking part in the bid.
“We will hold the bid this week and then promptly announce a preferred bidder,” said an E-Land spokesman.
He said the mid-tier fashion-and-retail business group expects to earn about 1 trillion won ($854 million) for the supermarket chain, which operates 36 stores nationwide, given its 2015 revenue of 1 trillion won.
However, the analysts say it is highly unlikely for KKR to offer 1 trillion won for Kim’s Club, citing Korea’s sagging consumer spending.
“With no one else taking part in the bid, KKR would not bet aggressively on the supermarket chain,” said an analyst at a Seoul-based securities firm. “I don’t think E-Land would stick to $1 trillion won price tag. Both sides will likely engage in intense negotiations until the deal is reached. Or, the sale could fall through. Who knows?”
The sale of Kim’s Club is part of E-Land’s ongoing campaign to raise much-needed cash to improve its financial health.
The group also plans by 2017 to list shares of E-Land Retail, which currently owns Kim’s Club.
Over the past few years, E-Land has been struggling with rising debts after borrowing large sums of money to finance multiple merger and acquisition (M&A) deals at home and abroad.
It also spent money on expanding its retail and fashion businesses in China. The company now runs nearly 7,000 restaurants, fashion shops and other retail stores across the world's second-largest economy.
Among E-Land’s 27 affiliates, only theme park E-World is listed on the local bourse.
E-Land World, the group's holding company, has a controlling stake in E-Land Retail and E-Land Park, which operates hotels, restaurants and other leisure-related businesses. Chairman Park controls E-Land World with a 40.59 percent stake.