Hanssem Acquisition Pursued by 'Lotte', Aiming for Synergy Among Department Stores, Construction, and Furniture

IMM PE Fund Invests 299.5 Billion KRW... Expanding Experiential Offline Stores
Expecting Collaboration with Lotte Hi-Mart, Lotte Construction, and Various Sectors

Lotte is partnering with private equity firm IMM Private Equity (IMM PE) to acquire Hanssem, the number one furniture and interior company in South Korea.

Expecting Synergies from Department Stores to Construction

On the 10th, Lotte Shopping announced that it will participate as a strategic investor in IMM PE, which is acquiring management rights of Hanssem. The day before, the board of directors decided to invest 299.5 billion KRW in IMM PE's management participation fund. Lotte will participate as a limited partner (LP) in the fund that IMM PE will establish for the acquisition of Hanssem.

IMM PE will manage operations for the time being. Lotte Shopping plans to seek synergies through a strategic alliance with Hanssem. In particular, by holding a right of first refusal, it is expected to secure a favorable position to acquire management rights of Hanssem in the future.

A Lotte Shopping official said, "Hanssem is the number one company in the home interior industry with abundant growth potential, so we decided to invest expecting synergies in various areas such as products, content, and customer attraction," adding, "It will help strengthen product competitiveness, differentiated space planning, and content development, and collaboration with Hi-Mart, construction, and other affiliates is also expected to create group-level synergies."

The reason Lotte Shopping is actively participating in the Hanssem acquisition is that it believes there will be significant synergy effects not only in offline sales channels such as department stores and electronics retailers but also across group affiliates including Lotte Construction. Despite the prolonged COVID-19 pandemic, Lotte Department Store continues to perform well in living-related products such as electronics and furniture alongside luxury goods. Marketing that bundles electronics and furniture together at Lotte Hi-Mart, an electronics specialty store, as well as built-in furniture supplied by Lotte Construction for apartments, can also expand Hanssem's presence.

Competitiveness of Hanssem, Industry Leader

Hanssem's position in the domestic B2C market is overwhelming. Since entering the market with kitchen furniture in 1970, Hanssem has expanded its scope to building materials such as bathrooms, windows, and flooring, maintaining the top position in the domestic kitchen and interior furniture sectors.

Last year, it achieved a record high sales of 2.0674 trillion KRW. In the second quarter of this year, sales and operating profit rose by 9.6% and 22.6% respectively compared to the previous year, raising expectations for achieving 2 trillion KRW in sales for the second consecutive year. The operating profit increased by 22.6% due to the strong remodeling business, and sales in the remodeling sector grew by 24.6% year-on-year, which is also noteworthy.

The online platform Hanssem Mall is also growing rapidly. It attracts over 3 million visitors monthly on average, and its popular 'Home Planner' service allows customers to preview the appearance of spaces after construction through 3D simulation before interior installation. As of the second quarter, Hanssem's cash equivalents stood at 71.3 billion KRW, down from 105.7 billion KRW at the end of last year, but its short- and long-term borrowings are only 53.8 billion KRW. The debt ratio is also healthy at 86.2%.

Expansion of Experiential Offline Stores

This year, Lotte has opened a series of large stores in collaboration with Hanssem. At Lotte Mart Busan Gwangbok Branch, Lotte Department Store Bucheon Jungdong Branch and Ulsan Branch, and Lotte Mall Dongbusan Branch, they introduced urban large-scale total home interior stores where consumers can experience and purchase kitchens, bathrooms, furniture, household goods, and remodeling services all in one place.

In particular, the 'Hanssem Design Park Lotte Maison Dongbusan Branch,' opened in June at Osiria Theme Park in Gijang-gun, Busan, boasts a sales area of 2,960 square meters across the first and second floors, making it the largest among 38 domestic and international furniture and electronics brand stores located in Lotte Department Store.

This content was produced with the assistance of AI translation services.