Lotte Group may acquire Ticket Monster

Cho Young-jae, a Lotte Shopping official in charge of the e-commerce business, explains about newly launching combined shopping platform Lotte ON at Lotte Shopping building in Seoul, April 27. / Courtesy of Lotte Shopping

By Kim Jae-heun

Despite repeated refusals for market talks on Lotte Shopping's proposed acquisition of Ticket Monster (TMON), the country's first social commerce operator, the underwhelming launch of Lotte's e-commerce service has, ironically, brought that possibility back to the table, according to sources familiar with the issue last week.

While Lotte Group wants to expand its footprint in the growing e-commerce business given the sector's huge growth potential, Lotte's recently launched online shopping platform apparently failed to impress, they said.

As worries are becoming a reality that Lotte ON's launch would be less than perfect, senior fund managers and local private equity funds (PEFs) were expecting Lotte may consider acquiring a major stake in TMON.

“From what I know, there have been talks inside Lotte Group of taking over TMON in various scenarios. Lotte Shopping wants its combined shopping mall to settle down as soon as possible and install itself efficiently into the market but it looks unlikely due to the company's conservative organizational culture,” a senior fund manager at a U.S.-based investment bank in Seoul said on the condition of anonymity. “Acquisition with TMON, if it happens, will be a good chance for them. For that, no big financial burden is expected as Lotte may team up with strategic investors to closing the deal. Acceptable price can form under 1.2 trillion won.”

Regarding the scenario, Lotte Shopping denied the speculation saying there is no chance and no need for the company to acquire TMON, “at this moment.” Lotte Group's retailer made it clear that it will pursue its own way to expand its online business.

A local PEF source requesting anonymity also said it's unlikely that Lotte Shopping will acquire TMON because Lotte just launched its own online shopping mall.

“The rumor is not new. There have been rumors about Lotte Group taking over TMON and it was taken almost as a fact. M&As are not some kind of children's game that a firm will decide on overnight,” the source said.

Lotte ON is an important business in which the holding company has big expectations. Lotte Group Chairman Shin Dong-bin called Lotte ON a game-changer and stressed the future of his retail business depends on the success of its digital transition.

A whopping 3 trillion won has been invested into Lotte ON and Chairman Shin appointed Lotte Department Store CEO Kang Hee-tae as the chief executive in charge of the group's retail-related business strategies. Shin earlier sacked some high-ranking group executives to improve the efficiency of business management under a unified leadership. He earlier said the group planned to close 30 percent of its offline outlets across the country to reduce costs.

TMON's asset value in the market was estimated at 1.7 trillion won as of April this year. It recorded its first surplus in March after continuously decreasing its operating loss from 40 billion won last year.

TMON has adopted a limited-time promotion where it offers discounts for different items every hour. However, it is more likely to go public than merge with Lotte Shopping as it recently selected Mirae Asset Daewoo as its underwriter for an IPO.

Although the social commerce firm has not proven its ability to make continuous profit on a yearly basis, it is aiming for a special listing, which is an option in which the exchange market helps promising firms go public despite their unfavorable financial status. In this case, the firm has to show it has a good chance to make a turnaround and furthermore dominate the market to deliver big returns for its investors.