EXCLUSIVE Shinsegae eyes on taking over Hanjin's logistics unit
A Hanjin Logistics delivery worker takes a parcel from a convey belt prior to loading them on a vehicle at a distribution center in Mapo District, Seoul, Oct. 27. / Korea time file
By Kim Jae-heun
Local department store franchise Shinsegae is looking to buy Hanjin Group's logistics unit to bolster its delivery service infrastructure to cope with the rapidly growing e-commerce business.
“This is definitely a good chance for Shinsegae to acquire a delivery service firm. There is no reason not to take it when Hanjin wants to sell it as it recapitalizes,” an industry source said.
Hanjin Group owner family heiress Cho Hyun-ah, who formed a three-party alliance with local activist private equity fund Korea Corporate Governance Improvement (KCGI) and mid-sized builder Bando Engineering & Construction to oppose Hanjin KAL's takeover of Asiana Airlines, recently argued that the company should focus on disposing of minor business units to increase capital rather than purchase the distressed airline.
Shinsegae, which is focusing on expanding its online business through SSG.com, showed interest in purchasing Logen Logistics when it was put up for sale last year, but decided its 7 percent market share was too low.
Hanjin Logistics, on the other hand, has a 13.2 percent share of the parcel delivery market, just 0.6 percent smaller than that of No. 2 player Lotte Global Logistics.
It has not been decided whether Hanjin will sell off its delivery service unit as a whole or only some of its stake ― the group could adopt the same share exchange deal that Naver chose to do with CJ Logistics in October.
At the same time, there is the possibility that shareholders such as Kyungbang and GS Homeshopping will oppose selling the delivery unit, as selling it off could have a certain economic impact.
Apart from its parcel delivery service, Hanjin operates land transportation, loading and unloading for the shipping and warehousing businesses.
The delivery service sector has flourished recently due to the COVID-19 pandemic, and sales recorded 476.5 billion won in the first half of the year, up 23 percent up from 2019. Sales involving delivery services accounted for 30 percent until a few years ago, but this has grown to 50 percent.
However, Hanjin Logistics does not contribute to the group's overall corporate value as it is not considered a major business.
Shinsegae's main rivals in the online business are Naver, Coupang and Lotte, which have either their own delivery service firms or strategic partnerships with local logistics companies.
Operating a logistics firm under group management is considered important in providing a quality service.
“What makes Coupang's Rocket Delivery service different from others is its punctuality and easy-to-refund system. These were possible because Coupang's own delivery unit provides services for Rocket Delivery members,” an industry source said.
The government's decision to adopt safer working conditions for delivery personnel is also raising their value in the market.
The Ministry of Employment and Labor, together with the Ministry of Land, Infrastructure and Transport, revealed protective measures last Thursday to ensure delivery drivers work no more than 52 hours in five days and get 15 days off per year.