Lotte Group could feel synergies from Hanssem
Lotte Shopping’s plan to buy a stake in Hanssem, the largest furniture seller in Korea, through a private equity group is expected to generate synergy effects for the Lotte Group that go beyond retail channels.
Through Hanssem, Lotte Shopping can attract more customers to affiliated department stores, discount outlets and electronics device stores. Apart from retail, Lotte Engineering & Construction could buy from Hanssem built-in materials, while Lotte Chemical could supply its engineered stone, used for kitchen counters, to Hanssem.
Hanssem sells furniture, remodels homes and supplies materials to other businesses.
Lotte Shopping was selected as a strategic partner by IMM Private Equity last Friday in its acquisition of Hanssem.
The selection was made after IMM Private Equity, a Gangnam-based private equity group, signed an agreement with Cho Chang-geol, the company’s CEO, and seven other affiliated parties, to acquire around 30 percent of Hanssem for an estimated 1.5 trillion won ($1.3 billion), according to media reports.
Lotte Shopping announced it would invest 299.5 billion won in an IMM Private Equity fund to be established to acquire the Hanssem shares.
Lotte will close the deal after the private equity group officially acquires Hanssem shares, expected within this year, according to a spokesperson for Hanssem.
Hanssem could make Lotte Himart stores more attractive by “creating a space where electronics devices, home appliances and furniture are all in the same place,” said a spokesperson for Lotte Shopping.
Lotte could also open brick-and-mortar shopping complexes for furniture, like its Lotte Maison Dongbusan located in the southern port city.
Lotte is considering opening another such store near its newly-opened The Time Villas premium outlet in Uiwang, Gyeonggi.
Apart from retail, Lotte Chemical is expected to benefit by supplying engineered stone to Hanssem.
Engineered stone is more resistant to heat and more durable than average stone for kitchen counters.
Lotte Chemical acquired 72.5 percent of Belenco, a No.1 engineered stone seller in Turkey, through Lotte Advanced Materials in 2019.
The stone could be used for Hanssem’s interior remodeling business, just as Hyundai L&C supplies furniture materials to Hyundai Livart, which then sells furniture at Hyundai Department Store.
Hyundai Livart is a furniture company that is 41.2 percent owned by Hyundai Green Food, which also owns 12 percent of Hyundai Department Store.
Synergy effects between Hanssem and Lotte Engineering & Construction are also expected, as Hanssem supplies materials and furniture to clients that include construction companies.
Lotte Shopping’s latest move reflects Lotte Group Chairman Shin Dong-bin’s vow to discover and invest in rising businesses.
At the group’s biannual value creation meeting held in July, Shin highlighted the importance of “bold innovation” and “discovering new businesses,” demanding CEOs actively invest from a future perspective.
The living sections generated the second largest sales in department stores last year after luxury goods, according to local media outlets.
Lotte Shopping also faces challenges from its investment in Hanssem.
“Lotte Shopping is currently in a spot where it desperately needs to transform digitally as it seeks to transform the retail business through improvement of its e-commerce strategies,” said Ahn Ji-yeong, an analyst at IBK Securities, in a report on Monday.
The acquisition of Hanssem shares could “slow down its e-commerce strategy by distributing the group’s resources at a time when its digital transformation is slower than its peers,” Ahn added.
BY JIN MIN-JI [email@example.com]