△2018 China (Luohe) Food Marketing Innovation Summit & 3rd Leisure Food Manufacturers and Distributors Precision Matchmaking Conference Free registration is in full swing; scan the QR code for details. South Korea's Lotte Mart has finally found its latest buyer. On the evening of May 11, Liqun Commercial Group Co., Ltd. (hereinafter referred to as "Liqun Co., Ltd.") announced that the company plans to acquire two Hong Kong legal entities and ten East China legal entities, each 100% owned by Lotte Shopping (Hong Kong) Holdings Co., Ltd., to acquire the 15 properties and 72 stores directly or indirectly held by these 12 companies, with a transaction price of 1.665 billion yuan. ▲ Details of the 72 stores involved in this transaction ▲ Details of the 15 properties involved in this transaction Liqun Co., Ltd., the buyer of Lotte Mart this time, is headquartered in Qingdao, Shandong, and its business covers commercial retail, logistics and distribution, catering, accommodation, entertainment, tourism, and other fields. According to its 2017 annual report, the group operates 41 retail stores, 44 convenience stores, and 3 "Fuji Farm" fresh community stores, located in Qingdao, Yantai, Weihai, Rizhao, Dongying, Zibo, Weifang, and Lianyungang, Jiangsu. In 2017, Liqun Co., Ltd. achieved total operating revenue of 10.5538 billion yuan, a year-on-year increase of 2.54%; net profit attributable to shareholders of the listed company was 394.5 million yuan, a year-on-year increase of 9.03%. Regarding this transaction, Liqun Co., Ltd. stated that it is an important step in the company's national strategic layout and aligns with its development plan. After the transaction is completed, the company's stores will radiate to the four regional markets of Jiangsu, Anhui, Zhejiang, and Shanghai, while also consolidating its market share and radiation capability in the Shandong market, achieving the leap from a regional commercial group to a national commercial group. At the same time, it will resolve various social conflicts and hidden dangers caused by the suspension of operations, promote the development of the local circulation market, provide employment opportunities, improve property utilization efficiency, and achieve a win-win situation for both the enterprise and local economic development. Overall, this transaction will also have three impacts on Liqun Co., Ltd.: First, after the transaction is completed, the number of company stores will double, covering five regional markets: Shandong, Jiangsu, Anhui, Zhejiang, and Shanghai, significantly expanding the company's operating scale. Second, the acquisition targets are mainly distributed in the East China market, with Jiangsu as the core, radiating to Anhui, Shanghai, and northern Zhejiang, which aligns with the company's regional layout for supply chain integration. Leveraging its existing logistics and distribution advantages, the company can achieve rapid opening of the acquired stores. At the same time, while gradually opening the acquired stores, the company will initiate the site selection and construction of a comprehensive logistics center in Jiangsu to achieve regional centralized distribution. With the substantial increase in terminal market size, the company's bargaining power with upstream manufacturers will also be further enhanced, scale advantages will become more apparent, and there is room for further improvement in the company's comprehensive gross margin. Third, as the acquired stores gradually open, the company's operating revenue will increase significantly, but simultaneously initiating the opening preparations for multiple stores is also a major challenge to the company's management capabilities. Moreover, the concentrated opening of multiple stores will incur certain period expenses, which will have a short-term negative impact on the company's profit indicators; however, in the long run, it will greatly enhance the company's market influence and scale, and will have a positive impact on various financial indicators. In fact, as early as March this year, there were reports that Liqun Co., Ltd. would take over some of Lotte Mart's stores in China. However, at that time, Liqun issued an announcement stating that the matter was only at the investigation stage and that it was not the only interested party. According to Jiemian News, Lotte Mart's stores in the East China region were obtained from the acquisition of Jiangsu-based supermarket chain Shidai Retail in its early days, with prime locations but leases that may be nearing expiration. Industry analysts pointed out that at nearly 1.7 billion yuan, if there is no property assets included, the price is still a bit high, which is also why no enterprise has been willing to make a move. According to data, in May 2008, Lotte Mart officially entered the Chinese market by acquiring 8 stores of Beijing-based Vanguard, and by the end of 2009, it had increased its store count to 100. According to Lotte Mart's plan at the time, it would first expand in Beijing, Tianjin, Liaoning, and Shandong, then gradually expand to the national market, aiming to open 300 hypermarkets in China by 2018. However, Lotte Mart's decline began to show in 2012, with store expansion losing momentum while store closures continued to rise. Worse, the "THAAD" incident in early last year added insult to injury for the already struggling Lotte Mart. It was reported that it had 99 hypermarkets in China, of which 87 were closed, and sales at the remaining stores were also affected. Lotte Group stated that last year, its overseas division's sales were 10.7 trillion Korean won, a decrease of 7.8% from 11.6 trillion won the previous year, marking the first decline in sales since Lotte officially began its overseas business in 2005. Despite Lotte Group injecting 4 billion yuan in two rounds in March and August 2017 to support its Chinese Lotte Mart operations, it was unable to turn things around. In September 2017, Lotte announced its decision to sell its Chinese Lotte Mart stores and selected Goldman Sachs to handle the sale of its Lotte Mart stores in China. Lotte had previously planned to package and sell these stores by the end of 2017 or early 2018, but progress was slow. However, before Liqun, there were reports that Wumart had already made a move. On April 26, Lotte China stated that Lotte would sell 21 Lotte Mart stores in Beijing to Wumart, selling 87.38% of Lotte Mart China's shares, with the remaining shares still held by Lotte, at a price of 248.5 billion Korean won (approximately 1.42 billion yuan). However, Wumart has not yet responded to this. If the above reports are true, after excluding the stores acquired by Wumart and Liqun, Lotte Mart would have only about a dozen stores left in mainland China, just one step away from a complete withdrawal from the Chinese market. Source: Lianshang.com -END-