Lotte Group is accelerating its asset sales. The liquidity crisis has emerged as the competitiveness of its two major pillars and cash cows, 'chemistry' and 'distribution', has weakened over a long period. Currently, Lotte Group is fully committed to overcoming the crisis through asset sales. Experts advise actively selling underperforming businesses and using the cash secured from these sales to find future growth engines.
According to industry sources on the 20th, Lotte Group has begun to actively carry out asset securitization from this month. Lotte Rental, the leading domestic rental car company, has been sold to foreign private equity firm Affinity Equity Partners. This was officially announced after both parties signed a memorandum of understanding on the sale of a 56.2% stake in Lotte Rental held by Hotel Lotte and Busan Lotte Hotel for 1.6 trillion won on the 6th.
Lotte Shopping is considering the sale of the Lotte Department Store in Busan's Centum City. It has selected Cushman & Wakefield, a global commercial real estate service company, as an advisor to proceed with the sale process. The Lotte Department Store in Busan's Centum City has struggled against the Shinsegae Department Store in Centum City, which is considered the largest in the world. The expected sale price of the store is estimated to be between 200 billion and 300 billion won.
Lotte Chemical adjusted its contractual agreements due to a decline in revenue, which led to a breach of financial covenants on company bonds worth 2 trillion won, thereby alleviating the liquidity crisis. To do this, it even provided the Lotte World Tower, a core asset and landmark of the group, as collateral to banks. As a result, Lotte Chemical secured a total of 4 trillion won in available liquidity funds, including 2 trillion won in deposits as of October.
Lotte Healthcare, a 100% subsidiary of Lotte Holdings, is expected to sell its joint venture, Theragen Health, in which it has invested 25 billion won. A Lotte Holdings official noted, "Lotte Healthcare is planning to hold a shareholders' meeting regarding the liquidation of the corporation on the 24th." It is reported that Lotte has successively transferred the employment of Lotte Healthcare employees in September and December on a group-wide basis.
There are also rumors in the industry about the sale of the Seocho-dong site owned by Lotte Chilsung Beverage. The site measures 42,312 square meters (approximately 12,821 pyeong). While it is currently used as a logistics warehouse for Lotte Chilsung Beverage and a maintenance facility for Lotte Rental, the site is estimated to be worth 2.6 trillion won due to its geographical location in Gangnam. A representative from Lotte Chilsung Beverage stated, "Similar to the sale of the liquor business, we have not considered the sale of the Seocho-dong site." They added, "While there are currently no specific development plans, we plan to closely consult with the Seoul city government once a concrete development plan is established."
In addition, it has been reported that Lotte Holdings and Lotte Shopping are also contemplating the sale of properties they own to resolve the liquidity crisis. Representative examples include Hotel Lotte L7 and Lotte City Hotel. Hotel Lotte is said to be considering cashing out properties, focusing on business hotels in Seoul and local hotels.
These movements by Lotte Group aim to eliminate the liquidity crisis. On the 28th of last month, Lotte Group disclosed its self-help measures to overcome the liquidity crisis through an investor relations session aimed at institutional investors. At that time, Lotte announced plans to liquidate low-revenue assets and high-quality assets and sell non-core affiliates.
Experts say that Lotte Group must also implement strategic projects to establish future cash cows based on the assets it has sold in order to completely escape the liquidity crisis. Seo Yong-gu, a professor of business administration at Sookmyung Women's University, stated, "After securing as much cash as possible through the sale of high-quality assets, the group must reassess its business direction and assets to quell the market distrust triggered by the liquidity crisis."
Jeong Yeon-seung, a professor of business administration at Dankook University, noted, "Given the poor domestic and international economic situation, Lotte Group should sell businesses that have low growth or profitability among its various operations. One way to strengthen competitiveness for future cash cows is to use the cash secured from such sales," adding, "The group is in need of overall restructuring."