Lotte says Lotte Rental sale approval will boost profitability, financial health

Lotte said Tuesday that the Korea Fair Trade Commission had approved the sale of Lotte Rental shares held by Lotte Hotel and Busan Lotte Hotel. The group plans to close the deal by October after a shareholder meeting and other follow-up procedures.

Earlier, on Aug. 11, Lotte signed an agreement to sell a controlling 61.2 percent stake in Lotte Rental to global investment firm TPG. The stake consists of a 38.1 percent holding from Lotte Hotel and a 23.0 percent holding from Busan Lotte Hotel. The sale price is 59,000 won ($43) per share, for a total of 1.31 trillion won.

Lotte plans to use the proceeds to improve the financial health of Lotte Hotel and Busan Lotte Hotel and strengthen their business competitiveness. The group intends to improve the hotel business's earnings structure by renovating domestic flagship properties and enhancing premium brand operations. Lotte Hotel posted operating profit of 135.6 billion won in the first half, triple the year-earlier figure, driven by a jump in foreign tourist arrivals.

Lotte is also accelerating portfolio restructuring through the divestiture of non-core businesses and asset optimization. This year, the group has raised about 1.7 trillion won through a series of asset and stake sales — including a 90 percent stake in Lotte Ecowall (170.8 billion won), the Bundang logistics centers of Lotte Shopping and Lotte Wellfood (131.1 billion won), the Lotte Mart Kintex branch (82 billion won), and the Cheongju factory and site of Lotte Nestlé Korea (34.7 billion won).

Lotte Chemical is also building a foundation for long-term competitiveness through business restructuring. Its Daesan plant completed a spin-off process in June and, as of Tuesday, launched a merged entity under the name H&L Advanced following a merger with HD Hyundai Chemical. This marks the first case in which a government- and industry-led business restructuring has resulted in a full corporate merger.

Consultations are also under way with affiliates to establish an integrated operating framework for the Yeosu plant, following approval of its business restructuring plan last July. The goal is to improve production efficiency, strengthen cost competitiveness and build a business structure better able to respond flexibly to market changes.

Lotte said operating profit rose across its major affiliates in the first half, reflecting broad-based improvement in profitability. Lotte Shopping posted sales of 7.07 trillion won and operating profit of 342.8 billion won in the first half, up 3.8 percent and 81.5 percent, respectively, from a year earlier. Lotte Hotel recorded consolidated first-half sales of 2.66 trillion won, up 22.6 percent year on year, while operating profit jumped to 135.6 billion won. Lotte Wellfood reported first-half sales of 2.18 trillion won and operating profit of 100.5 billion won, gains of 7 percent and 98 percent, respectively, from the same period last year.

"We expect the group's profitability and financial soundness to improve significantly with the approval of the Lotte Rental sale, on top of the strong first-half earnings at our major affiliates," a Lotte official said. "We plan to keep up the pace of restructuring in the second half through further sales of non-core businesses and idle assets."