Lotte Mart May Halt Its China Pullout as China, S. Korea Relations Normalize
Xu Wei
/SOURCE : Yicai
Lotte Mart May Halt Its China Pullout as China, S. Korea Relations Normalize

(Yicai Global) Nov. 1 -- South Korea's Lotte Mart, owned by Lotte Group, has appointed Goldman Sachs to manage the divestiture of its 112 stores in China.

It has held talks with five to 10 companies, but no deals have been concluded thus far. It might be a tough decision, but the firm may halt its retreat from the Chinese market, Yonhap reported yesterday, citing a market insider in South Korea.

Some believe the hypermarket operator will shelve its plan to sell its Chinese businesses, while others argue that normalizing relations between China and South Korea will facilitate the proposed divestiture, the report noted. Lotte Mart welcomes the improved bilateral relations, but its Chinese stores are still closed. "The divestiture decision has not changed and will go ahead as planned," it said.

However, the consensus is that the South Korean company will go with the tide and retract its decision, just as it did when reneging on promises never to leave the Chinese market a few months ago. Lotte Mart has scaled up its Chinese operations since 2008. It signed a land swap agreement with the South Korean government in February to transfer a golf course for the deployment of the Terminal High Altitude Area Defense (THAAD) anti-ballistic missile defense system by the US military in a move that met with strong opposition from the Chinese government, and its business has gone downhill in China ever since.

All of Lotte Mart's 112 Chinese stores are now shuttered. The firm estimates that it sustained losses of at least USD447 million (KRW500 billion) in the six months after the THAAD deal. Lotte Group injected KWR360 billion into the hypermarket chain in March to bail out its Chinese operations, followed by another USD300 million "blood transfusion" on Aug. 31, but all that money has been used up by now.

A few months earlier, news got out that Lotte Mart was planning to sell its Chinese stores, but the group denied the reports immediately, saying that it "will never give up on the Chinese market." However, the firm later backtracked and decided to divest all Chinese stores on Sept. 14.

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Keywords: South Korea , Lotte Mart