[Courtesy of Lotte Card]
SEOUL -- Lotte, the fifth-largest conglomerate in South Korea, has sealed a deal to sell a 79.83 percent stake in a credit card unit to a consortium led by MBK Partners, a private equity fund, for 1.38 trillion won ($1.16 billion).
Lotte Corp., the group's holding company, should sell off its stake in three financial units -- Lotte Capital, Lotte Card and Lotte Insurance -- by October this year as part of efforts to realign its corporate structure and enhance governance.
The holding company said in a regulatory filing on Monday that its equity ratio in Lotte Card would be cut down to 13.95 percent after the consortium involving MBK Partners and Woori Bank acquired 79.83 percent. MBK Partners would control 60 percent and Woori Bank 20 percent.
In a separate deal, Lotte Corp. has agreed to sell a 53.49 percent stake in Lotte Insurance to JKL Partners, a private equity fund, for 373 billion won. After the deal, the holding company would own five percent in the insurer.
Initially, Hahn & Company, a private equity firm specializing in buyouts, was selected as preferred bidder for Lotte Card, after the group considered the bidding price and non-price factors such as the job security of employees, growth potential, the buyer's management capabilities and cooperation with the group's retail unit.
But the group changed the preferred bidder on May 21 due to objection by Lotte Card's union. State prosecutors are probing complaints from unions and civic group activists that Hahn & Company CEO Hahn Sang-won sold NSM (N Search Marketing) to KT higher than its fair value in 2016 and evaded tax.
Hahn & Company said that it has made "all the required tax payments incurred as a result of the NSM transaction in accordance with the relevant tax laws."
"There are no grounds for the claim of overvaluation," the private equity firm said in a statement. In most cases, EBITDA multiple is applied for the valuation of a private company. NSM acquisition value represents a 7.8X EBITDA of 2016, lower than EBITDA multiple for other comparable deals.
EBITDA (earnings before interest, taxes, depreciation and amortization) is a measure of a company's overall financial performance and is used as an alternative to simple earnings or net income in some circumstances.
In October 2017, Lotte Group chairman Shin Dong-bin launched Lotte Corp. and secured firm group-wide control by holding a 13-percent stake in the holding company. The realignment of the group's structure would be completed after the holding company absorbed more affiliates and reduced its stake in financial units to meet requirements from financial regulators.
reporter
Lim Chang-won
cwlim34@ajunews.com
