Lotte seeks to team up with PEF to acquire Hanssem

Hanssem's headquarters in Mapo, Seoul / Courtesy of Hanssem

By Kim Jae-heun

Lotte Group is considering partnering with IMM Private Equity (IMM PE) to jointly acquire Hanssem, Korea's largest furniture and home furnishing company, industry sources said, Sunday.

IMM PE already signed a memorandum of understanding with Hanssem in July to acquire a controlling 30.21 percent stake.

“We are looking at Hanssem with keen interest. We are in discussions with IMM PE on the matter. However, nothing has been decided about when and how we will participate in the investment,” a Lotte Group official said.

Local PEF sources said the deal is expected to be completed by this year. The price tag of Hanssem was estimated at around 1.5 trillion won with IMM PE paying half. Sources said the other half could be paid by strategic investors including Lotte. Lotte will take part in the special purpose company's share established by IMM PE for the Hassem deal.

The retail giant has been staying away from huge investments for the past few years, in order to minimize financial risks. It has opted instead to collaborate with PEFs rather than make direct investments.

IMM PE had planned to acquire Hanssem on its own, because the PEF owns online furniture firms like Oheim and Bucket Place, with which it hopes to create synergy with Hanssem. But Hanssem reportedly requested strongly to invest in its cash-intensive overseas market entry.

“PEFs often resell companies three to five years after acquiring them. In order to make a successful exit, PEFs focus on increasing corporate value. For Hanssem, IMM PE may not obtain its short-term goal alone as the domestic furniture market is becoming saturated faster than expected and it needs to spend a lot of money in marketing to expand business both on and offline,” an industry source said.

On a related note, Korea's furniture market has been on a growth trajectory during the protracted COVID-19 pandemic, as more people telecommute and spend money to spruce up their homes. Lotte's acquisition of Hassem with IMM PE is expected to bring Lotte Group to the No. 1 position in the local furniture market, according to analysts.