Global private equity fund (PEF) manager TPG will acquire Lotte Rental, Korea's No. 1 rental car company. TPG signed a memorandum of understanding at the end of May, about two months ago, to acquire management control and has been in exclusive talks, according to reports.
According to the investment banking (IB) industry on the 11th, TPG will sign a stock purchase agreement (SPA) as early as the same day with Hotel Lotte and Busan Lotte Hotel to acquire Lotte Rental equity.
Hotel Lotte and Busan Lotte Hotel will each hold board meetings the same day to approve the agenda to sell Lotte Rental equity to TPG.
The transaction target is the 61.18% management-control equity in Lotte Rental held by Hotel Lotte and Busan Lotte Hotel, and the deal value is said to be about 1.3 trillion won.
Earlier, last year, Lotte Group sought once to sell Lotte Rental to Hong Kong-based PEF manager Affinity Equity Partners (Affinity), but the plan fell through after the Korea Fair Trade Commission rejected the business combination.
Early this year, the Korea Fair Trade Commission said that because Affinity will acquire SK Rent-a-Car in Aug. 2024 and own it, there were significant concerns that competition would be substantially restrained if it acquired Lotte Rental.
TPG was understood to have advanced talks with Lotte Group as the Lotte Rental sale to Affinity collapsed, emphasizing that it has no rental car enterprises worldwide and is therefore free from Korea Fair Trade Commission (FTC) risk.
At the end of May, TPG signed a memorandum of understanding with Hotel Lotte and Busan Lotte Hotel to acquire management-control equity in Lotte Rental, securing exclusive negotiating rights early.
Hankook & Company Group (Hankook Tire) jumped late into the Lotte Rental acquisition race in tandem with Chairman Cho Hyun-bum's parole, but it could not even begin concrete talks, edged out by TPG's exclusive negotiating rights.
TPG is said to have prepared the acquisition funds for Lotte Rental entirely with its own capital (equity), without bank acquisition financing.
If the transaction is completed, Lotte Group's liquidity is also expected to get breathing room. The combined borrowings of Lotte Group's key affiliates totaled 29.933 trillion won as of the end of last year.
In particular, Hotel Lotte is a major funding source for Lotte Engineering & Construction and Lotte Biologics, and the sale proceeds are expected to be invested in supplying liquidity to Lotte Engineering & Construction and expanding facilities at Lotte Biologics.
An IB industry official said, "Lotte Group is also understood to have valued highly that TPG can make a quick payment by using all its own capital without raising external funds."