Lotte Card up for sale with three possible suitors

Lotte Card, Korea's fifth largest card company, is up for sale for around three trillion won ($2.3 billion), according to local media reports on Wednesday.

MBK Partner’s investment subsidiary, which owns 59.83 percent of Lotte Card, named JP Morgan as its advisor for the deal.

Lotte Card did not confirm the reports on Thursday.

Lotte Card had a market share of 10.3 percent for the card industry at the end of the first quarter after Shinhan Card (20.2%), KB Kookmin Card (17.2 %), Samsung Card (15.5 %) and Hyundai Card (13.4 %). Lotte Card has 86.9 million users.

Potential bidders include fintech firms Viva Republica, Kakao Bank and Woori Financial Group.

“For fintech platforms, expanding business to get more people on their platforms is key,” said Lee Jeong-hwan, an assistant professor, College of Economics and Finance, Hanyang University.

“Other than for profitability, fintech firms can get customer data and also get to operate the card business without having to earn a license from the financial authorities, which is difficult.”

Kakao Bank and Toss Bank have both made clear they want to get into the card business.

In a conference call on Aug. 3, Kakao Bank CEO Yoon Ho-young said the company is “reviewing ways to raise the prevalence of its card business by expanding partnerships with card companies.” He added the company is “positively reviewing” entering the market after obtaining a credit card business license.

“Credit cards is one of the businesses Toss Bank announced it would roll out last October,” said Kim Sang-kyu, a spokesperson for Toss Bank. “But a credit card business takes many years to build."

Viva Republica denied it is looking into the deal.

Woori Financial Group is seen as a contender due to its small footprint in the industry. It had a mere 7.8 percent market share as of the end of the first quarter. Woori Bank owns 20 percent of Lotte Card already.

“Lotte Card may seem less attractive to industry leaders because Lotte Card does not have an affiliated bank, like Shinhan or KB Kookmin, who easily market cards to their customers,” said an industry insider.

MBK Partners acquired 79.83 percent of Lotte Card in a consortium with Woori Bank for 1.38 trillion won in 2019, according to the local media reports.

Lotte Card reported 91.88 billion won in consolidated net profit in the first quarter, up 81 percent on year.

Lotte Card said its investment in digital services helped raise the profit. The company uses customer data collected from points offered by Lotte.

BY JIN MIN-JI [jin.minji@joongang.co.kr]