Lotte duty-free ambitions hinge on South Korea store license

Wed Dec 14, 2016 9:43pm EST
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By Joyce Lee

SEOUL (Reuters) - Five bidders covet three lucrative downtown duty free licenses to be issued by South Korea on Saturday, and arguably none is more desperate for a win than Lotte Duty Free.

The world's No.3 duty-free retailer's ambitions to one day become the world’s biggest operator were thwarted this year by a criminal investigation that forced its parent Lotte Group to scrap a multi-billion-dollar IPO.

A win on Saturday would allow the beleaguered South Korean conglomerate to reopen a Seoul mega-store and revive its goal of global duty-free dominance.

Failure would not only keep the store shuttered, it would curb enthusiasm for the planned $4.5 billion initial public offering of Lotte Group's hotel business, designed in part to help fund expansion in duty free.

"If Lotte is chosen, it's expected to have a positive influence on Hotel Lotte's planned IPO, which is the centrepiece of Lotte Group's announced target of turning into a holding company structure," said Yang Ji-hye, retail analyst for Meritz Securities.

South Korea's customs agency will decide the winners of three new duty-free licenses for large companies in Seoul on Saturday, adding new stores to the world's largest duty-free market worth $7.9 billion last year.

Other participants in the auction include Samsung Group's Hotel Shilla Co Ltd (008770.KS: Quote) joint venture, Shinsegae Inc (004170.KS: Quote), Hyundai Department Store Co Ltd (069960.KS: Quote) and SK Networks Co Ltd (001740.KS: Quote).

South Korea's fifth-largest business group, Lotte has invested a huge amount of energy in regaining the license that it failed to renew six months ago, around the time that prosecutors revealed they were investigating the group.   Continued...

The logo of Lotte duty free shop is seen at its main shop in Seoul, South Korea, December 13, 2016. REUTERS/Kim Hong-Ji