Lotte Shopping to buy Indonesian discount stores

The Korean company beats rivals to buy SHV Holdings' 75% stake in PT Makro Indonesia for $222 million.
Lotte Shopping said on Tuesday that it intends to buy a 75% stake in Pt Makro Indonesia from Dutch trading company SHV Holding for W294 billion ($222 million).

Lotte, South KoreaÆs top department store chain, will purchase 4.7 million shares in the Indonesian discount retailer for cash. Its Singapore affiliate Lotte Shoppings Holding will buy the remaining 25% of the company following approval from the Indonesian government, according to a regulatory filing.

The deal follows Lotte's acquisition of a 49% stake in CTA Makro, a Chinese cash-and-carry supermarket venture, from SHV Holding in late 2007. Lotte paid Ç57.6 million ($83.2 million) for the company, which operates six supermarkets in Beijing and two in Tianjin under the Chinese brand name Wankelong. Lotte completed the takeover in June and renamed all the Makro outlets Lotte Mart. Shinsegae, Korea's biggest discount-store operator and LotteÆs main rival, has 10 outlets in China.

Lotte said at the time that the CTA Makro purchase was part of its ôVRICö (Vietnam, Russia, India and China) strategy. The Lotte group has 17 companies in China, four in Vietnam and three in India. So buying PT Makro, which operates 19 stores in Indonesia, suggests either a shift in strategy or else simply an opportunistic move.

PT Makro was set up in October 1991 and its first store was opened at Pasar Rebo, Jakarta Timur the following year. Today, the company has outlets in Java, Bali, Sumatra, Kalimantan, and Sulawesi, serving about 500,000 customers.

SHV Holding, the largest privately-owned company in the Netherlands, said in July that it and its partners planned to sell their stake in PT Makro and hired HSBC Holdings to find a buyer. In addition to Lotte, Wal-Mart Stores, Jardine Matheson and Carrefour SA had been rumoured as possible suitors. At the time, SHV said it would use the proceeds from the sale to help expand its business in Thailand.

ôWe received a healthy interest from a number of parties including existing and new players in the industry, both in the region as well as globally. Lotte Group was selected after a thorough selection process,ö SHV spokesperson Joost van Klink said on Tuesday.

Under the terms of the deal, Lotte will take over the buildings, land, leases, staff and inventory of PT Makro as a complete package, and run it as a going-concern.

Lotte Shopping is the retail arm of Korea's fifth-biggest family-run industrial group (or chaebol). It controls more than 40% of the Korean department-store market and 14% of the discount-store sector. It also has a network of luxury department stores and hypermarkets in Moscow and China. Lotte Group has 45 affiliated companies with total group assets of Ç31 billion and net revenue of Ç23 billion in 2007, and is engaged in various businesses such as food and beverages, retail distribution, petrochemicals, construction and finance.

Shares of Lotte Shopping fell just over 3% yesterday from MondayÆs close.
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