Lotte confirms interest in acquiring eBay Korea
Lotte Shopping CEO Kang Hee-tae poses in his office at company headquarters in central Seoul, last Nov. 6. Courtesy of Lotte Shopping
By Kim Jae-heun
Lotte Shopping CEO Kang Hee-tae confirmed the group's interest in acquiring controlling stakes in eBay Korea after Shinsegae, SK Telecom and private equity firm MBK Partners made their cuts in the preliminary bidding.
“Sure, we are interested in acquiring eBay Korea. We did receive an investment memorandum. However, the group could reveal relevant specifics through the regulatory filing,” Kang told reporters on the sidelines of his participation in this year's annual shareholders' meeting at Lotte VIC Market in Yeongdeungpo District in southern Seoul.
Morgan Stanley and Goldman Sachs are the lead underwriters of the eBay Korea deal, the deal amount of which is estimated to come in at no less than 5 trillion won. Lotte Shopping's participation in the eBay Korea bidding process came after its ambitiously launched Lotte ON online shopping platform failed to impress, with investors saying the tepid results could put the group in jeopardy in terms of securing new growth engines.
Lotte Shopping reported 16 trillion won in revenue last year, a decline of 8.8 percent from the previous year. Operating profit for 2020 came in at 346 billion won, down 19 percent during the previous year. Coupang's successful New York Stock Exchange listing put Lotte in a dire situation, pushing it to make its next move as it looks like only a matter of time before the country's largest e-commerce firm will raise large-scale funding to invest more in its online business.
Furthermore, Shinsegae closed a deal to swap 250 billion won worth of stocks with Naver Shopping, the No.2 e-commerce player after Coupang. Shinsegae, which operates the country's largest discount store chain E-mart, hopes to increase its online sales on Naver's shopping platform, while the web portal operator wants to strengthen its fresh food supply through E-mart.
If Lotte completes the acquisition of eBay Korea, it will be positioned to increase its group-wide share in the local e-commerce market to 16 percent, helping it compete with existing rivals and new entrants.
“We are sorry for our shareholders as there was a lot of trial and error in setting up our e-commerce business. Our e-commerce business has turned out unsatisfactory. We plan to hire outside experts,” the executive said, adding discussions to possibly separate Lotte ON aren't on the table.
Regarding the updated restructuring plan focusing on offline stores, the executive said the company restructured 120 offline stores and it plans to complete the closure of some 200 offline stores across the country over the next two years as a strategy to cut fixed costs and improve profitability.