Lotte to acquire Buy the Way for $236 million

Lotte Group, the operator of 7- Eleven outlets in South Korea, agreed to acquire convenience- store chain Buy the Way from private-equity fund Unitas Capital for 274 billion won ($236 million).

Korea Seven Co., more than 50 percent owned by Lotte Shopping Co., said in a regulatory filing today that the acquisition will strengthen business competence.

Korea Seven will increase its stores by 68 percent as it gains a chain that generated revenue of about 610 billion won last year in Asia s fourth-largest economy. Retail sales growth in South Korea, where store operators are buying rivals to expand, accelerated to 12.2 percent in November, the fastest in more than a year.

The acquisition by Korea Seven, the country s third-biggest convenience-store chain, will narrow the gap with its bigger rivals FamilyMart and GS25, Hong Sung Soo, an analyst at NH Investment & Securities Co., said in a phone interview. South Korea s big retailers are actively seeking acquisitions to either further strengthen their leadership or change their industry rankings.

Lotte Shopping shares rose 2.7 percent to 307,000 won at the close in Seoul trading today, boosting its gain over the past year to 71 percent. The benchmark Kospi Index fell 2 percent and has gained 50 percent in the past year.

There should be economies of scale by purchasing products jointly with Lotte Mart and Lotte Super, giving them more pricing power, Dana Kim, an analyst with Taurus Investment & Securities Co. said in an interview today. The price tag seems to be at an appropriate level.

Lotte Group has more than 50 affiliated companies including Lotte Shopping, South Korea s biggest department-store operator, and No. 1 drinks maker Lotte Chilsung Beverage Co. Korea Seven operates 2,220 7-Eleven stores while Buy the Way has 1,510 outlets.

Soo Park, an executive at News Communications, the public relations agency hired by Unitas Capital, confirmed the purchase yesterday and said Deutsche Bank AG advised the fund.

Korea Seven s board of directors approved the purchase yesterday, according to the company s filing today.

Lotte Shopping, South Korea s biggest retailer, on Jan. 14 said it s considering a bid for GS Retail Co. s department and discount-store businesses. The department-store operator is acquiring Chinese retailer Times Ltd. for HK$4.87 billion ($627 million).

Shinsegae Co., operator of South Korea s biggest discount- store chain, in 2006 bought Wal-Mart Stores Inc. s unprofitable chain of supercenters for 825 billion won. Tesco Plc two years ago bought South Korea s Homever discount chain for 958 million pounds ($1.55 billion).