Lotte eyes water purifier business

Shin Dong-bin Lotte chairman

Lotte Group announced Friday that it is considering throwing its hat into the ring to acquire Woongjin Coway, the country’s biggest manufacturer of water and air purifiers.

The announcement came as the Korea Exchange asked the retail giant to confirm the rapidly spreading rumors that it has taken steps for the acquisition.

“At a group level, Lotte is now considering of taking over Woongjin Coway,” an official of Lotte Group said. “But nothing specific has been fixed yet.”

The Seoul-based conglomerate will choose an investment bank next week as an advisor for the purchase and also receive an information memorandum from Woongjin Coway, he said.

Market insiders believe that Lotte is interested especially in Woongjin Coway’s well-established network for door-to-door sales because it can create synergy when combined with the retail business of the group, which owns Lotte Department Store, Lotte Mart and Lotte Supermarket.

“It could bring the group a lot of benefits if it takes advantage of Woonjin’s salesmen when selling other home appliances,” an industry insider said.

Yoon Seok-keum Woongjin chairman

Woongjin Coway has the strongest sales force here, totaling around 13,500. They are now selling refrigerators and vacuum cleaners as well as water purifiers, bidets and air purifiers.

With Lotte joining the bidding, the competition for the acquisition is expected to become fiercer. Private equity firms MBK Partners and Hahn & Company as well as GS Retail, Shinsegye Department Store, Hyundai Department Store and LG Group are all considered potential buyers.

Woongjin Coway is attractive because it was an important cash-cow subsidiary of Woongjin Group. The affiliate accounted for about 30 percent of the conglomerate’s total sales last year.

Woongjin Group said last February that the sale of its affiliate was aimed at securing funds to invest more in the solar power business.

Regarding the unexpected decision, some industry watchers have speculated that serious financial difficulties have led to the sale.

Apart from Woongjin Coway, Lotte Group also hopes to acquire Hi-Mart, the nation’s largest electronics appliance retailer.

The group said a series of acquisition bids are in line with their vision to develop a new growth engine.

“We aim to surpass the 200 trillion won mark in sales by 2018,” the Lotte official said. “To reach the goal, active mergers and acquisitions are necessary.”

Lotte Group Chairman Shin Dong-bin has repeatedly said that the group should secure enough cash for possible M&As, arguing chances come in the time of crisis.

Hi-Mart, established in 1999, is a former domestic sales unit of Daewoo Electronics, which went under court receivership during the 1997-1998 financial crisis.

Along with Lotte, other retail companies such as GS, Shinsegae and CJ are thought to have an interest in acquiring the company. <Korea Times/Kim Tae-jong>

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