April 27, 2024

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[THE INVESTOR] South Korea’s first duty-free shop Dongwha Duty Free is offloading its controlling stake to Hotel Shilla after it failed to repay debts worth 71.5 billion won (US$61.47 million) to the Samsung-affiliated hotel, industry sources said on Jan. 31.

Due to deteriorating finances, Dongwha had failed to meet the deadline for repayment on Dec. 19. 

In June, Hotel Shilla exercised a put option to sell a 19.9 percent stake in Dongwha, which it had previously acquired in 2013.

Under the agreement signed by the two, Dongwha is obligated to provide an additional 30.2 percent stake, which had been pledged as collateral. This stake is held by Lotte Tour Development Chairman Kim Ki-byung, the husband of Dongwha Duty Free CEO Shin Jung-hee.

“We decided to provide the additional stake as Kim couldn’t pay back the amount to Hotel Shilla,” an official at Dongwha said.
With the acquisition, Hotel Shilla will own a 50.1 percent controlling stake in Dongwha. 

Established in 1973, Donwha had shown steady growth over the past decades as a midsized duty-free shop. But faced with increasing competition from chaebol-controlled companies like Lotte and Shilla duty-free stores, its sales have recently slowed.
Blockbuster brands such as Louis Vuitton and Gucci closed shop in Dongwha this year.

By Park Han-na (hnpark@heraldcorp.com)