Seoul, Oct 19 - Lotte Shopping Co Ltd, South Korea's second biggest retailer, has agreed to buy Chinese supermarket operator Times for up to $650 million, speeding up its push into China's fast-growing retail sector.
The deal highlights the ambitions of South Korean business groups to grow beyond a saturated domestic market and may pave the way for other cross-border deals now that global funding markets are showing signs of a recovery.
"Pricing came out a bit pricier than markets had expected, but Lotte's Times deal was almost a compulsory step for Lotte Shopping, which aims for fast expansion in China," said HI Investment Securities analyst Min Young-sang.
"The acquisition establishes a strong bridgehead into the Chinese retail market, and while financial costs may weigh on the company's balance sheet, such a move is seen as positive in the longer term."
The value for a 72.3 percent stake in Times would be above the $600 million offered by rival bidder Chinese retailer Wumart, according to a report by the South Korean newspaper Chosun Ilbo on Saturday.
"We have in effect acquired Times, though some processes (to complete the deal) remain," said a Lotte Group spokesman, who declined to be named.
"The pricing is seen close to the earlier reported $630-$650 million," he added, confirming media reports of the acquisition.
Times declined to comment on the deal.
TENDER OFFER
Lotte is also set to make a tender offer to minority shareholders to secure the rest of the Chinese retailer, a spokesman for Lotte Shopping said.
It will release details of the deal on Tuesday.
The bid for Times had pit Lotte against Wumart, a major supermarket chain operator with a market capitalisation of about $2.1 billion, which was believed to be in final talks to acquire Times, sources said last month.
Lotte, South Korea's biggest retailer by market value after Shinsegae Co Ltd, is speeding up its expansion in China with the Times acquisition after taking over Dutch wholesaler Makro's Chinese stores in 2007 and its Indonesia stores last year, analysts said.
Lotte, which operates department stores, supermarkets, and discount outlets in South Korea has a different strategy on overseas expansion to that of its rival, Shinsegae's E-Mart, which prefers organic growth.
Lotte shares fell as much as 2.5 percent as investors fretted that the retailer had paid too much for the Chinese firm, but trimmed falls to close down 0.8 percent.
CHINA PUSH
Major global retailers including Wal-Mart Stores Inc have been stepping up their presence in China in recent years to gain exposure to the fast-growing economy and 1.3 billion consumers.
The fact that Times is a "solid, established retailer" in China brightens Lotte's Chinese business outlook, said Yoo Ju-yeon, an analyst at Meritz Securities.
Hong Kong-based Times operates hypermarkets and supermarkets, mostly in eastern China.
Lotte Shopping's department store unit, Lotte Department Store, currently operates one store each in Russia and China, with another in Tianjin, China, set to open in 2011. A store in Hanoi, Vietnam is scheduled to open in 2014.
Lotte Mart, Lotte Shopping's discount retailer, currently operates 30 stores outside South Korea, including China.
Lotte's confirmation of the Times buyout follows news late on Friday that it would invest 733 billion won ($633 million) in its Hong Kong unit to help it expand in China and Hong Kong.