Lotte to Make Final Offer for Matahari's Stores, Competing With Carrefour

Lotte Group, the parent of South Korea’s biggest retailer, will make a final offer for PT Matahari Putra Prima’s hypermarkets to compete with Carrefour SA in Indonesia. 

“We’ve come a long way and we’ll make a final bid,” Hwang Kag Gyu, executive vice president of international and new business planning at Lotte, said in an interview yesterday. “There’s ample liquidity so funding won’t be a big problem.” 

The purchase would give Lotte as many as 49 of the combination department store-supermarkets in an economy forecast to expand 6 percent this year. Units of Seoul-based Lotte, whose assets include petrochemical operations, are expanding in China, Vietnam, Indonesia and Russia to tap faster growth and rising affluence in developing markets. 

Matahari may sell most or all of its food-retailing business, which may be valued at $700 million to $1 billion including debt, people with knowledge of the deal said earlier this month. Wal-Mart Stores Inc. and French retailer Casino Guichard-Perrachon SA are among the retailers that have looked at Jakarta-based Matahari’s assets, according to the people.

“Lotte has coveted the Indonesian market because of its relatively friendly mood toward foreign capital and consumption- oriented economy,” Lee Ji Young, an analyst at LIG Investment & Securities Co., said by phone today. “Lotte also has a good track record with its existing Indonesian operation, so I think this kind of interest makes sense.” 

Deadline May Move

Matahari climbed as much as 4.2 percent to 1,500 rupiah, the most in more than a week, before trading at 1,460 rupiah as of 10:36 a.m. in Jakarta trading. Lotte Shopping, whose department stores and discount shops make it South Korea’s biggest retailer, slid 1.4 percent to 467,500 won. 

Matahari operates 49 hypermarkets in Indonesia, while Lotte, the parent of Lotte Shopping, has 21 outlets, Tong Yang Securities Inc. said in a Nov. 4 report. A purchase of all Matahari stores would let the South Korean company overtake Carrefour, with 61 outlets, as the largest hypermarket operator in the Southeast Asian nation, the brokerage said. 

The deadline for final bids is likely to be delayed from an original schedule of early December, Hwang said, without specifying a new date. 

Possible Stake Sale

There is also a possibility that bidders may acquire a stake in Matahari instead of buying the hypermarket assets, Hwang said, adding that the result of the bidding is due next year. 

Lotte Shopping said Nov. 12 it had submitted a letter of intent to buy Matahari’s hypermarket business. 

Danny Kojongian, Matahari’s director of corporate communications, declined to comment. “We are still awaiting the result of the study from Merrill Lynch,” he said in a mobile- phone text message yesterday. 

Casino and Lotte were considering a binding offer for the food-retailing business of Matahari after proceeding to the second round of the auction, two people with knowledge of the deal said earlier this month. 

Carlyle Group and Hong Kong’s Dairy Farm International Holdings Ltd. had also looked at the Indonesian retailer’s assets, three people familiar with the process said earlier this month. 

Matahari said in October it hired Bank of America Corp.’s Merrill Lynch unit to analyze its business and follow up on interest by companies outside Indonesia for an investment or partnership. The company sold control of its department-store arm to a unit of CVC Capital Partners Ltd. for 7.2 trillion rupiah ($770 million) in January. 

China, Southeast Asia

Lotte Group seeks acquisitions in China and Southeast Asia as sales overseas in the next decade are likely to expand two to three times faster than in its domestic market, said Hwang, who spends about a third of his time abroad. 

South Korea’s fifth-largest business group aims to open at least 15 new discount stores in China next year, and Hwang has ordered the group’s team in China to look at department stores it may acquire, he said. 

Asia’s economy could be as large as those of the U.S. and European Union combined by 2015, International Monetary Fund Managing Director Dominique Strauss-Kahn said on Oct. 18. 

“You should first lead the Asian markets to be a global name,” Hwang said.

Honam Petrochemical Corp., a Lotte unit, said in July it would acquire Malaysia’s Titan Chemicals Corp. for 1.5 trillion won ($1.3 billion) in cash. The Korean group said the same month it would buy 63.2 percent of LuckyPai, a Chinese home-shopping company, for $130 million. 

Overseas Growth

Lotte Group has said it will increase revenue from overseas markets to 30 percent of the total by 2018 from an estimated 12 percent for this year. 

Shin Kyuk Ho founded Lotte Group in Japan in 1948 as a bubble-gum maker. The Korean-Japanese businessman opened his first confectionery plant in South Korea after the normalization of relations between the two North Asian nations, building Lotte into a food and leisure group spanning hotels, candy making and an amusement park in the capital.

Lotte Group has about 60 affiliated companies including South Korea’s biggest beverage maker Lotte Chilsung Beverage Co., KP Chemical Corp. and Lotte Card Co.Source: Bloomberg