April 26, 2024

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[THE INVESTOR] LF Group said on Nov. 22 it is acquiring a majority stake in the country’s third-largest realty trust KORAMCO REITs & Trust.

The Korean fashion group will pay 189.8 billion won (US$168 million) for a 50.74 percent stake, higher than the originally discussed 46 percent.

It acquired the shares from KORAMCO President Lee Kyu-sung who owns 5.7 percent, Korean Reinsurance with 9.7 percent and 35 percent held by individual shareholders. 

Industry sources said that LF wanted to increase the stake to 50 percent to secure its control considering that in the absence of Lee other major shareholders might be interested in KORAMCO. The major institutional investors include Woori Bank (12.2 percent), Korea Development Bank (11.7 percent) and Kiwoom Securities (9.94 percent).

“Chairman Lee’s control was so strong that institutional investors did not raise their voice, but once he’s out it might be a different story,” said an industry source. “For this reason, LF probably wanted to up its stake to at least 50 percent.”

With the acquisition, LF will also tap into the asset management market as it will also acquire KORAMCO Asset Management, 100 percent owned by the parent firm.

The move is part of the group’s efforts to diversify its fashion-focused business, the company said in a public filing.

The deal is the largest acquisition by the fashion group, which was spun off from LG Group in 2007.

Founded in 2001, KORAMCO recorded revenue of 124 billion won and 66.1 billion won operating profit in 2017.

LF’s sales reached 1.6 trillion won in 2017, 90 percent of which was generated from its fashion business. By acquiring KORAMCO, it is forecast to see an 8 percent increase in revenue with operating profit rising by 60 percent.

By Park Ga-young (gypark@heraldcorp.com)