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New preferred buyer named for Lotte Card

May 22,2019
The sale of Lotte Card took a dramatic turn on Tuesday when Lotte Group chose a new preferred bidder: a consortium of MBK Partners and Woori Bank.

The previous lead contender for an 80 percent stake in the card affiliate was Hahn & Company, a local private equity firm.

An allegation that Hahn & Company evaded taxes raised doubts that the company would pass a screening procedure by financial regulators.

The MBK/Woori Bank consortium’s initial bid stood at around 1.6 trillion won ($1.3 billion), according to a source at Woori Bank.

“Our bidding price is around 1.6 trillion won, but the price could change through negotiations,” the source said.

MBK Partners, a Seoul-based private equity, wants a 60 percent stake while Woori Bank will take 20 percent, the source confirmed.

The remaining 20 percent will continue to be owned by Lotte Group.

Some market analysts projected that Woori Bank could raise its stake to ultimately become the owner of Lotte Card as a part of its drive to bolster its non-banking business.

But others wonder if that is Woori Bank’s long-term goal given that the card industry faces a multitude of challenges - especially the government’s move to reduce card commissions charged to smaller merchants.

Meanwhile, Hahn & Company has been the subject of a criminal complaint filed by the labor union of mobile carrier KT and a civic group in March. They claim that the private equity firm failed to pay taxes in full for the selling of a marketing firm to KT affiliate Nasmedia in 2016.

The revelation immediately clouded the prospects of the sale as the law bans a company with a record of being fined for financial irregularities over the past five years from becoming an owner of a financial firm.

But Hahn & Company denied the accusation.

"Under any legal or tax opinion, it is undoubtedly clear that neither tax valuation guideline nor gift tax has any relevance to any M&A transactions between unaffiliated companies," it said in a statement.

Lotte Group is required to offload its stakes in any financial affiliates by October 2019 to improve its corporate structure.

Lotte Group established its holdings company, Lotte Corporation, last October as a first step in reforming an outdated organizational structure of affiliates linked by cross-shareholdings.

If the retail-focused group fails to sell the shares, it is expected to face fines worth over 100 billion won.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]


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