The duty-free unit of Hotel Lotte will seek to acquire global luxury brands as well as foreign tax-free operators as part of efforts to expand its presence and influence in the global retail market, according to reports on Thursday.
Lotte Duty Free, the nation’s largest duty-free operator, believes that acquiring a foreign luxury house will have a synergy effect on its business, citing the success of foreign rivals that use the value of luxury brands as a negotiation tool for their global expansion strategy.
DFS Group, the second-largest operator of duty-free shops in the world, for instance, may have benefited from its direct ties with LVMH Moet Hennessy Louis Vuitton. LVMH, the world’s largest luxury conglomerate, has owned the DFS Group since 1996.
“We have to look into global market entries both with hotel and duty-free businesses and constantly make contact with foreign luxury goods makers to discuss product supply for that. Whether we have luxury brands ourselves means a lot in (the) negotiation process,” a Lotte insider was quoted as saying by Yonhap News Agency. Lotte Duty Free will start listing up possible merger and acquisition targets, the official added.
To acquire foreign luxury brands, Lotte Group, the nation’s seventh-largest conglomerate, is expected to use funds raised through the planned initial public offering of its hotel unit.
Lotte Duty Free is an affiliate of Hotel Lotte, de facto parent company of the Korean retail giant.
The hotel unit plans to go public on the Seoul bourse soon, as part of the group chairman’s reform measures after his bitter succession battle with his elder brother. The date has not been set yet, but the stock sale of the hotel unit is estimated to be at least 4 trillion won ($3.47 billion).
The company is contacting not only foreign luxury houses but also Australian duty-free shops for possible M&A, the Lotte official said.
As of last year, Dufry of Switzerland topped the duty-free retail market by revenue, followed by DFS Group and Lotte.
Lotte Duty Free, however, denied the report, saying that the official was only expressing his personal opinion.
By Cho Chung-un (christory@heraldcorp.com)
