(LEAD) Lotte Group considers buying GS Retail units

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SEOUL, Jan. 14 (Yonhap) -- Lotte Group, a South Korean retail conglomerate, is
considering buying the discount and department store units of GS Retail Co.,
industry sources said Thursday.

Lotte operates Lotte Shopping Co., the nation's second-largest retailer, which
has two divisions under its wing -- Lotte Department Store, the country's largest
department store chain, and the third-largest discounter Lottemart.
The sources said the group is mulling over buying the GS affiliates as it aims to
boost its discount store sector in order to compete with larger local rivals
E-Mart, operated by Shinsegae Co., and Home Plus, operated by Samsung Tesco Co.
The purchase would also likely strengthen Lotte's leading position among the
operators of department stores.
GS Retail, the retail arm of GS Group, has been seeking to sell its discount
store unit, GS Mart, and department store business GS Square, as part of efforts
to realign business operations.
The sales will include 14 stores of the GS Mart chain and three stores of GS
Square.
According to the other sources, however, Lotte will have to compete with some 10
potential buyers.
Hyundai Department Store Co., South Korea's third-largest department store by
sales, has expressed its interest in buying the two units of GS Retail.
"If the price is right, we can acquire them," said Kyung Chung-ho, vice chairman
of Hyundai Department Store, earlier this month.
Hyundai will be able to narrow the gap between itself and the second-largest
department store, Shinsegae Department Store, if it succeeds in the acquisition.
A competition is also likely between the leading operators of the discount stores
Shinsegae and Samsung Tesco. If acquired by Samsung Tesco, Homeplus will nudge
out E-Mart from the top position in terms of the number of stores.
Industry watchers estimate the deal may fetch more than 1.4 trillion won (US$1.25
billion), as GS Retail is expected to ask for a price higher than the combined
annual sales of the two units.
GS Mart and GS Square recorded annual sales of 795 billion won and 575 billion
won, respectively, in 2009.
GS Retail plans to close the bids by the end of this month, aiming to complete
the sales next month.
ygkim@yna.co.kr
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