Lotte says it will buy duty-free rival

The Lotte Group, a local retail conglomerate, plans to acquire all the duty-free stores operated by Aekyung Group, it said yesterday.

According to Lotte, Aekyung is currently looking for bidders for its duty-free shop division. On Tuesday, Lotte Hotel, a subsidiary of the Lotte Group, signed a memorandum of understanding to buy an 81 percent stake of AK Global, which includes Aekyung’s duty-free shops, for 80 billion won ($68.7 million).

The Aekyung Group has three offline duty-free stores - at COEX, Incheon International Airport and Gimpo International Airport - as well as an online shop. AK Global operates the shops in Incheon and Gimpo, while AK Retail runs the shop at COEX.

The Aekyung Group confirmed that it was seeking bidders but gave no further details on the expected sale.

Meanwhile, not all Lotte officials are convinced purchasing the shops will be beneficial.

One who declined to be named said, “We have been considering buying Aekyung’s duty-free shops. However, we are still not sure of the synergy effect it will have with our subsidiaries. Also, the reaction from the Fair Trade Commission looks a bit negative on the sale at the moment due to worries that the deal could violate rules over holding a monopoly.”

As of last year, Aekyung’s duty-free shops saw combined sales totaling 320 billion won, but the three Aekyung duty-free shops are reported to be holding debt amounting to around 200 billion won. If the acquisition goes through, Lotte will take on this debt.

Meanwhile, Lotte’s own duty-free shops posted 1.52 trillion won in sales last year.

According to industry estimates, Lotte’s duty-free shops account for around 49 percent of the local market, followed by The Shilla Duty Free Shop with 29 percent. Aekyung’s AK Duty Free Shop and Dongwha Duty Free account for the rest.

By Cho Jae-eun [jainnie@joongang.co.kr]