Lotte Group may explore other options after it has failed to close deals to sell financial units Lotte Card Co. and Lotte Non-Life Insurance Co. with respective preferred bidders within the exclusive bargaining period that expired on Monday.
According to sources from the investment banking and financial industries on Tuesday, the exclusive negotiations with private equity funds Hahn & Co and JKL Partners did not end with stock purchase agreements for the respective equity exchange in Lotte Card and Lotte Non-Life Insurance by Monday deadline.
Some industry watchers suggested the failure to strike the deal might be related to the recent accusation of Hahn & Co. CEO Hahn Sang-won for tax evasion, but an industry source said it has nothing to do with any external factors. There also had been questions why a less known PEF had been chosen over more established names like Hana Financial Group and MBK Partners.
The removal of preferential status allows the Korea’s fifth largest conglomerate expand negotiations with other bidders including Hana Financial Group and MBK Partners-Woori Bank consortium for Lotte Card, and MBK Partners and Hahn & Co. for Lotte Non-Life Insurance.
The Korean retail conglomerate and its lead manager Citigroup Global Markets on May 3 chose the two private equity funds, Hahn & Co and JKL Partners, as the preferential candidates to assume the two Lotte names. It was reported that Hahn & Co offered the highest bid of 1.44 trillion won ($1.2 billion) for an 80 percent stake in Lotte Card. Lotte Group plans to retain an around 20 percent stake to keep the credit card unit’s partnership with other Lotte units. For a 52.47 percent stake in Lotte Non-Life Insurance, JKL Partners reportedly proposed 390 billion won.
Despite looming speculation for another round of bids to pick new preferred bidders, market experts believe Hahn & Co. and JKL Partners still have competitive edge over others, and the sellers and buyers might have too many agendas on the table to finish their talks within the exclusive negotiation periods.
Lotte Group that plans to adopt a holding structure has until October this year to unload its majority stakes in the financial units to meet the Korea’s non-financial holding structure guidelines.
By Chung Seok-hwan and Choi Mira
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