Lotte Mart sale picks up steam

Lotte Mart’s sale of its Chinese operation is finally gaining some traction. A Chinese retail conglomerate recently visited around 70 stores in the country to assess their value, Lotte confirmed Friday.

Liqun Group is eyeing a purchase of some 70 Lotte Mart locations in China, one year after the Korean company closed them. The best-case scenario for Lotte would be handing over all 112 stores to Liqun, but a Lotte spokesman said the company was open to all options.

“No contract has been signed yet, and we do not have any details on the deal,” another spokesman said. “Several companies have expressed interest, and Liqun is one of them.”

Three to four more companies are said to be planning a field assessment with interest in acquisition. Lotte’s goal is to finalize the sale within this year’s first half.

Field assessment is still an early stage of the sell-off process, but it nonetheless represents progress for Lotte Mart, which has been struggling to find a buyer for its ailing Chinese operation.

The stores were put up for sale in September, and Lotte received calls from several interested parties, but they never reached the field assessment stage.

Thailand’s leading retail conglomerate, Charoen Pokphand Group, was reportedly the closest to buying. It engaged in talks for months, but the deal eventually fell through.

Lotte did not disclose why discussions stopped, but there is speculation that Charoen Pokphand was concerned about the Korean company falling out of favor with the Chinese government and had disagreements over the price.

Even if Lotte reaches an agreement with a buyer, the Chinese government has to approve the deal. This might pose a problem for Lotte. Last March, Chinese officials ordered 74 branches to close, citing fire code violations. Another 13 shut down voluntarily.

In typical cases, stores with fire code violations are given one month to turn things around and allowed to reopen after a second inspection. In the case of Lotte Mart, some inspectors never returned. Stores that did undergo a second inspection failed them.

The conventional wisdom is that Lotte fell on the wrong side of Beijing after the company offered a piece of land to the Korean government to build an American missile shield that China believes threatens its security interests. The controversy occurred around March, when Chinese officials started targeting Lotte Mart with inspections.

Sales at the remaining stores plummeted by 80 percent last year, according to the company, the result of a Chinese consumer boycott against Korean goods over the missile shield issue.

Industry sources estimate Lotte Mart’s loss last year has easily surpassed 1 trillion won.

BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]