SOUTH KOREA. Local reports today said that Lotte Group is closing in on the acquisition of airport and downtown rival AK Duty Free from the latter’s parent Aekyung Group.
The Moodie Report understands reliably that the reports are solid – and that talks regarding the acquisition of struggling rival AK Duty Free are both well advanced and firmly in line with Lotte’s expansion strategy.
But the deal is anything but a given in Korea’s heavily regulated business economy.
Valuation is also likely to be a key point of difference between the two parties. A Lotte spokesman told The Korea Herald today that the acquisition progress “had made little progress”, while declining to say whether a MOU had been signed as widely reported.
Quoting a Lotte statement, The Maeil Business Newspaper and Yonhap News Agency said the industry giant is also in discussions with the Fair Trade Commission to rule out any possible monopoly concerns that could slow or stop the takeover. Yonhap News Agency said that Aekyung Group had confirmed the proposed divestment.
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The main AK Duty Free beauty store at Incheon International Airport is brilliantly located immediately post the central security point and immigration. But profitability has been hard hit by the economic slump and onerous concession fees |
As revealed by The Moodie Report, Korean regulators barred Lotte’s proposed takeover of Paradise Duty Free recently due to monopoly concerns in Busan. Lotte’s arch rival The Shilla Duty Free is now poised to acquire Paradise.
The Maeil said that AK Duty Free Shop generated KW320 billion (US$274.62 million) in sales from its online shop and three branches in COEX, Incheon International Airport and Gimpo International Airport. Its Incheon operations have suffered badly this year due to a combination of high concession fees and the severe downturn in the Korean economy.
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If Lotte can gain approval for the deal it will operate both liquor & tobacco (above) and perfumes & cosmetics at Incheon |
The Maeil reported that industry giant Lotte Duty Free Shop generated KW1.1149 trillion (US$956.74 million) in sales last year, giving it a near 50% market share.
We’ll bring you comment from the interested parties as soon as possible.
NOTE: Look out for Martin Moodie’s on location report on the fast-changing Korean travel retail market next month.
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