Lotte has decided to sell 21 of its stores in the Beijing metropolitan area to a local Chinese retailer named Wumart Stores for 248.5 billion won ($231 million).
Lotte Shopping, running the Korean conglomerate’s department stores and discount chains, said Thursday the company’s board members agreed on the plan to sell the Lotte Mart outlets in China during an emergency meeting held earlier that day. This includes 11 large discount stores and 10 supermarkets. It will close one additional supermarket.
“Our board members agreed on the sale of an 87.38 percent share in Lotte Shopping’s Beijing affiliate to Wumei Holdings, the holding firm of Wumart,” a Lotte Shopping official said. “We will continue to hold a 5 % share in the affiliate.”
Founded in 1994, Wumart has about 900 stores across the world’s most populous country. The Chinese company, which posted USD 8 billion in sales last year, has been compared to the U.S.-based Walmart, due to the similarities of their business models.
After announcing its decision to pull Lotte Mart out of the Chinese market last year, Lotte initially considered selling all of the 112 stores across the country to a single company.
Following slow progress in the sale, however, the retail giant came up with a new strategy selling Lotte Mart stores to different firms in each region.
According to industry officials, Lotte began negotiating with Liqun Group, another Chinese retail giant that inspected 74 Lotte Mart outlets in Shanghai, over prices for the discount stores in the most populous city in the world.
Lotte said it will soon sign a stock purchase agreement with one of tentative buyers of its Shanghai affiliate.
The Korean conglomerate said it has also been negotiating with other local retailers over sales of Lotte Mart outlets in Chongqing, Chengdu, Shenyang and Jilin, so, as to finalize the deals by the end of this year as well.
Against this backdrop, Lotte Shopping will increase its capital by USD 650 million for smoother negotiations and repayment of its short-term debts.
Analysts expect the recent deal will improve Lotte Shopping’s performance, which deteriorated due to China’s economic retaliation last year over Lotte’s provision of its golf resort as the site for deployment of a U.S. anti-missile Terminal High Altitude Area Defense (THAAD) system here.
Amid the suspended operations of its 87 Lotte Mart stores in China, Lotte Shopping reportedly suffered a 1 trillion Won loss in China.
Lotte has been unable to resume construction of its shopping complex in Shenyang as well.