Lotte planning massive merger, acquisition spree

Retail conglomerate Lotte Group is expected to snap up firms at a rapid clip in a bid to expand its business and presence overseas.

“Lotte Group has its eye on some 20 local and foreign firms for a possible purchase,” Kim Sang-hoo, president of Lotte Confectionery, told reporters yesterday.

It marks the first time that a high-ranking executive from Lotte has revealed such specific details about the group’s M&A plans.

Lotte Confectionery, the nation’s largest confectionery firm, is also “skimming through five or six possible global confectionery firms to merge with,” Kim said, adding that if conditions allow, “the firm is aiming to buy at least one or two companies every year.”

Kim added that the company he oversees is planning to purchase a Pakistani confectionery firm in the latter half of this year.

A senior executive of Lotte Group also noted that the group is willing to “purchase continuously” if good opportunities arise but said that there is no specific target number at this time.

The retail giant is looking to dive into the M&A market to quickly expand and create synergy with its existing businesses.

The company said as much in January, when Shin Dong-bin, vice chairman of the group, signaled that he is “more than willing to purchase a company if there are good opportunities.”

Lotte is equipped with enough cash to buy other firms.

This year, the group put aside 1.4 trillion won ($1.24 billion) dedicated to promoting new businesses, including acquisition efforts. It also had around 3.5 trillion won in cash as of last June.

Lotte has been very active on the M&A front since December 2007, when it purchased 19 discount store branches in China from the Netherlands-based chain Makro.

In October 2008, immediately after the country was hit by the global economic crisis, the group acquired Makro outlets in Indonesia.

It also has focused on growth within Korea. Despite the bad economy that forced many companies to scale back expansion efforts, Lotte acquired Doosan Corp.’s beverage division in January and Kirin in October of last year. This year, it purchased Buy the Way, a convenience store chain, as well as GS Mart and GS Square. It also has submitted a bid to buy the trading company Daewoo International.

Lotte is competing with Posco for the deal.

According to Shin’s speech to employees in March of last year, Lotte Group aims to become one of the top 10 global groups in Asia by 2018. It is targeting 200 trillion won in sales by the same year.

By Choi Ji-young, Kim Ki-hwan [angie@joongang.co.kr]