Lukewarm Lotte Card Acquisition Battle... Is the 3 Trillion Won Sale Price a Stumbling Block?

Many Leading Candidates Absent

[Asia Economy Reporter Yu Je-hoon] The sale process of Lotte Card, a mid-to-upper tier card company in the industry, continues to show a lukewarm atmosphere in its early stages. Industry insiders analyze that potential buyers may feel burdened by the sale price, which is known to be around 3 trillion won.

According to the financial sector on the 10th, MBK Partners conducted a preliminary bidding for the management rights of Lotte Card through JP Morgan, the sales agent, on the 7th. MBK Partners acquired a 59.83% stake in Lotte Card for 1.381 trillion won in 2019, becoming the largest shareholder.

It is reported that Hana Financial Group has submitted a bid in this preliminary auction. Hana Financial also attempted to acquire Lotte Card three years ago before the previous sale but was unsuccessful. If Hana Financial acquires Lotte Card, its market share based on individual member usage performance would be about 13.9% (as of the first quarter), allowing it to leap to the top tier of the industry.

However, other major financial holding companies and big tech firms previously mentioned have reportedly not participated in this bidding. Woori Financial Group, which holds a 20% stake in Lotte Card and was considered a top candidate, is showing more interest in acquiring securities companies to diversify its group portfolio. Shinhan and KB Kookmin Card already hold leading positions in the industry, reducing their incentive. Other candidates such as KakaoBank and Toss have also reportedly shown no particular response.

The biggest reason for the lukewarm response in the Lotte Card acquisition battle is the 'price,' which is known to be around 3 trillion won. Although it posted a net profit of about 170 billion won in the first half of this year, ranking among the top in the industry by net profit, the sale price of 3 trillion won is somewhat burdensome. A financial sector official said, "Due to the impact of rising interest rates, the M&A market itself has frozen, and with the high possibility of an economic recession ahead, it would be difficult to acquire at such a large amount."

Lotte Card's focus on high-risk, high-return assets such as real estate project financing (PF) to strengthen profitability is also causing potential buyers to hesitate. According to data submitted by the Financial Supervisory Service to the office of Yoon Chang-hyun of the People Power Party, as of the first quarter of this year, Lotte Card's real estate PF loan balance was 1.2477 trillion won, accounting for 84% of the total real estate PF loans in the card industry (1.4758 trillion won). Although the proportion of senior loans is about 80%, making the possibility of rapid deterioration low, it is still a burden for financial companies to accept such risks.

An official from a card company said, "The entire credit card industry is struggling due to rising funding costs, and especially with the sluggish real estate market, concerns about the deterioration of real estate PF loans are emerging from regulatory authorities," adding, "Considering various conditions, it does not seem easy for potential buyers to bet a large amount like 3 trillion won."

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