[NEWS IN FOCUS] Hana is favorite in Lotte Card contest

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[NEWS IN FOCUS] Hana is favorite in Lotte Card contest

Published: 24 Apr. 2019, 20:01

Hanwha Group’s decision not to bid for Lotte Card has boosted the possibility of Hana Financial Group taking over the 1.5 trillion won ($1.3 billion) asset.

The groups were considered major rivals for the acquisition, but Hanwha did not participate in the bidding, which closed last week.

Hana Financial Group, the country’s third largest financial group by net profit, emerged as the most viable bidder as Lotte will likely prefer it over a private equity investor. Private equity investors are likely to reduce head count.

Hahn & Company and MBK Partners, Korean private equity groups, have entered the contest, according to analysts. But the buyout companies tend to lay off employees after purchase in order to cut costs and increase the sales value of the acquired asset.

Since first announcing the sale, the Lotte Group made it clear that it will opt for a buyer who will maintain jobs and benefits

Analysts believe that Hana Financial Group also has the financial wherewithal to buy a controlling stake in Lotte Card.

“The 98.37-percent share in Lotte Card is worth around 1.5 trillion won, according to media reports,” wrote Eun Kyung-wan, an analyst at Meritz Securities, in a report.

“Hana Financial Group is expected to use its disposable funding of 1 trillion won and cover the rest with the issue of hybrid bonds,” he added.

He went on to note that the deal could create downward pressure on Hana’s stock in the short run because of the dilution of returns, but in the long run the merger could generate growth for the group.

If Hana combines Lotte Card with KEB Hana Card, the merged unit would be the country’s third largest credit card company.

“The addition of Lotte Card could bring about the economies of scale that will help generate positive sentiment,” said Kim Haney, an analyst at KTB Investment & Securities.

Hana’s card affiliate is ranked six, with an 8.2-percent market share as of the end of last year, according to the Financial Supervisory Service.

If it acquires Lotte Card, with a 9.6-percent share, its market share would be right under that of Samsung Card, with 18.6 percent of the market. Shinhan Card is the top player, with 23.5 percent of the market.

A preferred bidder is expected to be announced as early as the end of this month.

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