SOUTH KOREA/US. In major breaking news, Hotel Shilla, parent company of travel retailer The Shilla Duty Free, is to subscribe to 44% of the share capital of 3Sixty Holding LLC, parent company of 3Sixty Duty Free & More (formerly DFASS Group).
In a joint statement first published via The Moodie Davitt Report, the two companies detailed the agreement between Hotel Shilla and the Miami-based enterprise founded by US entrepreneur Benny Klepach 25 years ago.
The two parties will have additional rights in five years. Closing of the deal is subject to customary regulatory approvals.
Shilla Travel Retail President Ingyu Han stated: “Today we have achieved another important pillar of our development strategy. With the partnership with 3Sixty we aim to develop the business in the Americas region (more and more influenced by Asian travellers) and to leverage each other’s competencies in the digital business to continue to lead the omnichannel disruption of travel retail.
“As is publicly known, negotiation with 3Sixty started quite a while ago and there were some hurdles* to overcome to achieve our objective. However, 3Sixty’s continued commitment to its strategic approach and its latest accomplishments, together with the expertise and enthusiasm we found in the 3Sixty management team, gave us the trust to eventually finalise this important expansion for our company”.
Benny Klepach commented: “We have always considered Shilla a potential strong partner to help us achieve our strategic objectives and continuing to lead the digital disruption in our industry. With Shilla in our shareholding structure we can compete successfully for every airport opportunity in the Americas.
“We will leverage Shilla’s competences in airport and digital retail and its merchandise strengths across categories. On the other hand, we will offer Shilla our knowledge of the specific regional environment, our recent developments in the digital business, our unique business model and strong relationships in the liquor category.”
3Sixty Executive Vice Chairman Roberto Graziani concluded: “We at 3Sixty are very happy about this new strong partnership. It delivers to us a very powerful mix of expertise, competence, commitment and financial strengths that will help us achieve our vision. We are looking forward to starting this fruitful collaboration.”
*Editor’s note: Han’s reference to former “hurdles” relates to a deal struck in principle in March 2015 designed to give Hotel Shilla a 44% stake in the-then DFASS for US$105 million. However the parties broke off talks by mutual agreement in mid-2017. While no price has been revealed this time around, the sum involved is likely to be considerably greater than in 2015 based on 3Sixty’s improved turnover, performance, management structure and digital strategy. Suggestions in the Korean media of a US$121 million price tag are understood to be well short of the mark as it excludes key aspects of the deal.
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Comment: Given an enterprise value of well over US$300 million according to The Moodie Davitt Report Business Intelligence Unit, the sale of a 44% stake (representing a deal probably just north of US$140 million) marks a momentous day for Benny Klepach who founded the company in 1987 with just US$35,000 of start-up capital. He has since built it into the world’s leading inflight retailer and supplier and a major distributor of branded duty free products.
Today 3Sixty (previously the DFASS Group) employs over 600 full-time employees, operating on five continents through a worldwide network of 120 packing and fulfilment stations and retail stores.
Its services include inflight duty free retail and pouring; buy onboard services; airport duty free and speciality retail and a fast-developing ecommerce business (as reported it is a 15% shareholder in Singapore-based KrissShop.com).
The acquisition is also good news for Hotel Shilla as it seeks to increase its global presence and lessen its reliance on the huge but vulnerable and intensely competitive Korean duty free market. Why vulnerable? Because of the channel’s overwhelming reliance on Chinese customers (mainly daigou resellers). In September, as reported, foreigners (mianly Chinese) accounted for an increased 85.9% share of the Korean duty free market.
