This article was published on March 24, 2025, at 3:04 p.m. on the ChosunBiz MoneyMove site.
LOTTE Corporation has granted final approval for the initial public offering (IPO), allowing LOTTE Global Logistics to submit the securities registration statement and begin the full-scale public offering process. After receiving approval for listing on the Korean Exchange's KOSDAQ market at the end of December last year, LOTTE Global Logistics has been deliberating on its corporate value and has decided to complete the IPO within the first half of this year.
Initially, the underwriting group was reviewing a valuation in the mid-1 trillion won range due to the obligation to safeguard the interests of financial investors (FI) in LOTTE Global Logistics. However, as LG CNS, considered the year’s first major IPO candidate, showed poor stock performance and the domestic market conditions worsened, it was decided to set the valuation lower than initially planned.
According to investment banking (IB) industry sources on the 24th, LOTTE Global Logistics submitted its securities registration statement and entered into the full-scale public offering process. The underwriting group is currently conducting a final review of the desired public offering price range. They have decided to set the valuation lower than the initially set 1 trillion won. Reports suggest that the underwriting group is considering a valuation in the mid-500 billion won range, approximately 30% lower, at around 700 billion to 800 billion won.
LOTTE Global Logistics, right after receiving preliminary approval for listing from the Korean Exchange at the end of December last year, finalized the direction regarding the proportion of new shares to be issued and the sale of existing shares for listing. It is reported that the proportion of the sale of existing shares could reach 50% to facilitate the exit of the second-largest shareholder, LLH, which holds a 21.87% equity stake (7,472,161 shares), with an average acquisition price of 37,339 won per share.
However, discussions regarding the valuation structure of LOTTE Global Logistics have prolonged due to the obligation to protect the interests of its financial investors (FI), necessitating a valuation above 1 trillion won. This stems from LOTTE Global Logistics having entered into a put option agreement after receiving 286 billion won investment from FI in 2017. If the public offering price is set below the exercise price of the put option, it would have to compensate the difference.
Should LOTTE Global Logistics go public at a price lower than 1 trillion won, it is expected to pay an excess of about 100 billion won, including a 3% annual compound interest. However, LOTTE Global Logistics has expressed its determination to see the IPO through, even if it incurs some cash outflow, as it plans to shed the burden of the put option with FI rather than withdraw its listing plan.
The fact that LOTTE Global Logistics recorded its highest-ever operating profit last year is a positive factor. The company achieved an operating profit of 90.26 billion won last year, reflecting a 41.1% increase compared to 63.93 billion won in 2023. LOTTE Global Logistics' operating profit has shown an upward trend with 42.65 billion won in 2021 and 62.64 billion won in 2022. The earnings before interest, taxes, depreciation, and amortization (EBITDA), commonly used for valuation assessments, stood at 326.5 billion won.
Sources indicate that LOTTE Global Logistics has selected its peer group primarily from domestic companies like CJ Logistics and Hanjin Logistics rather than overseas firms. This is due to the marked performance growth of CJ Logistics, which reported sales of 12.1168 trillion won last year, a 3% increase from the previous year, along with an operating profit of 530.7 billion won, up 10.5% from 480.7 billion won in the previous year.
An industry source noted, “According to the shareholder agreement between LOTTE Group and FI, if the IPO is not completed by the end of June, we will have to buy back all the shares held by FI,” explaining that it is a strategy to minimize losses to proceed with the IPO even at a slightly lower valuation, covering only the difference on the exercise price of the put option.