Lotte Confectionery and Food Announce Merger... Securities Firms Expect Cost Savings and Synergy Effects

[Asia Economy Reporter Myunghwan Lee] As Lotte Group's food affiliates Lotte Confectionery and Lotte Foods have announced a sudden merger, the securities industry analyzed that this merger will enhance business efficiency and synergy effects.

According to the financial investment industry on the 27th, the two companies held a board meeting on the 23rd and resolved to merge, planning to complete the merger on July 1 after obtaining shareholder approval on May 27. This merger will be structured with Lotte Confectionery remaining as the surviving corporation and absorbing Lotte Foods.

Lotte Confectionery stated, "This merger aims to integrate the infrastructures of both companies to actively respond to the rapidly changing food and beverage business environment and to take a step forward as a global food company," adding, "Through the merger, we will build a food portfolio targeting all age groups from infant formula to silver food and strengthen brand competitiveness."

The securities industry mostly evaluated this merger positively, expecting improvements in profitability, overseas sales, and expansion of new businesses. Yu-jeong Han, a researcher at Daishin Securities, diagnosed, "Synergy expansion through the integration of overlapping businesses, expansion of exports of Lotte Foods products using Lotte Confectionery's overseas corporate network, and cost reduction through infrastructure integration are expected." It is analyzed that in a situation where uncertainty is increasing, Lotte Confectionery will overcome the limitations of its confectionery-only business area, and Lotte Foods will overcome the limitations of its domestic-centered business.

The researcher added, "Cost reduction through production and logistics optimization will lead to profit improvement, and overseas sales expansion and new business expansion will drive external growth." Daishin Securities estimates that the simple combined sales of Lotte Confectionery and Lotte Foods this year will be 3.8626 trillion KRW, with an operating profit margin of 4.7%. This figure does not exclude internal transactions between the two companies.

There was also an analysis that this merger could lead to an overall easing of competition in the industry. Sang-hoon Jo, chief researcher at Shinhan Financial Investment, analyzed, "In the past, unnecessary costs were incurred due to overlapping business developments, but the integrated corporation is expected to pursue a profitability-oriented management strategy." He added, "As brand power has become important, the direction will be to nurture brands rather than unnecessary promotions," and predicted, "This will expand throughout the industry, establishing a virtuous cycle structure of profitability improvement."

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