South Korea's second largest supermarket chain Lotte is set to buy into Jiangsu-based retailer, helping its foray into the eastern China retail market.
South Korea's Lotte Group is to conclude a deal to buy a 72.3 percent stake in Jiangsu-based retailer Times Ltd., a senior executive of Lotte Mart, the China branch of the group, told Caijing on Oct. 19.
Wumart Stores Inc. has withdrawn from the acquisition talks with Times Ltd., Wumart spokesman Fu Yu told Caijing on Oct. 19.
A source close to the Times board of directors told Caijing that the company has submitted relevant documents to the Hong Kong Stock Exchange for approval.
An industry source told Caijing that Lotte has no presence in China's eastern market, where Times Ltd. has its operations.
It must carry out consolidation after the acquisition while also facing challenges from rivals like Taiwan-based RT-Mart and the domestic Lianhua supermarket in the area.
The Lotte Mart executive told Caijing that he is still unclear about the value of the deal.
A source close to Wumart told Caijing that the company appraised Times at less than HK$5 per share. However, Lotte outbid Wumart with an offer of HK$5.60 per share, compared with the HK$4.64 Times closed at on Oct. 12 before trading was suspended.
Times Ltd. has 874 million shares outstanding, 72.3 percent of which are held by Fang Keng.
To purchase the 72.3 percent stake, Lotte will have to pay about US$457 million based on the HK$5.60 per share offer.
The Wall Street Journal reported Monday that Lotte will make a takeover offer for all Times shares as early as Monday. It would have to pay US$631 million for all the shares.
Lotte Group is the second-largest supermarket chain in South Korea. It entered China in 2007 by purchasing Cta Makro, which was later renamed Lotte Mart. Lotte Mart now has 10 stores in China.
Times Ltd. has 65 stores in Jiangsu province and neighboring areas, including 53 hypermarkets and 12 supermarkets.The company had revenue of 4 billion yuan in 2008.
Wumart closed down 0.96 percent at HK$12.32 on Oct. 19.
1 yuan = 14 U.S. cents
