E-Land Acquires French Retail Outlet

E-Land will be taking over the Korean retail unit of the French discount store Carrefour.

E-Land held a press conference at Seoul Plaza Hotel on April 28 and said, “We agreed with Carrefour to take over the Korean unit for 1.75 trillion won (approximately 1.5 billion euro).”

The payments will be made in Euros, and E-Land’s two subsidiaries, New Core and E-Land World, will pay 200 billion won and 100 billion won, respectively. The consortium with Woori Bank and Kookmin Bank will raise 1.45 trillion won for remainder of the deal.

E-Land is expected to become a new strong power in the distribution industry with its department store (New Core Department Store), outlets (2001 Outlet and New Core Outlet), discount stores (Kim’s Club), and supermarkets (Kim’s Mart).

Lotte Shopping had been regarded as the most likely winner in the bid for Carrefour, because it offered 1.9 trillion won, topping E-Land, Shinsegae, and Samsung Tesco, whose offer prices ranged from 1.5 to 1.75 trillion won.

However, as Lotte Shopping began the due diligence process, it assessed that Carrefour was more troubled than expected, and cut back its offer price to 1.7 trillion won. Consequently, E-Land became the highest bidder with 1.75 trillion won.

E-Land was chosen as it agreed with Carrefour’s requirements of recognizing the employment of all its employees including union members, recognizing all contracts made with suppliers and lease stores, and accepting all conditions that secure the activities of labor unions.

E-Land will start its due diligence investigation soon and is expected to start the takeover process as early as June.

With its successful bid, E-Land once again proved its excellence in M&A.

E-Land was started by its Chairman Park Seong-su in 1980 as a clothing store in front of Ehwa Women`s University in Shinchon, western Seoul.

It grew as a mid-priced clothing corporation, and in 1994 it entered retailing by opening 2001 Outlet chains.

It has gained competitiveness in retailing using M&As to expand its business area since 2002, taking over New Core, Haitai Store, Olympus Department Store, and Shinsewha Department Store.

E-Land plans to distinguish Carrefour stores by making the stores a combination of New Core Outlet and Kim’s Club, and plans to give a new name to Carrefour.

“We will increase the number of outlets to 88. We plan to make fashion and distribution as the keys to future growth,” E-Land officials said.

There are speculations that Carrefour will make hundreds of billions of won in profits from the deal. Carrefour’s assets without debt amount to 1.075 trillion won. It is also expected to profit from falling exchange rates.

In this regard, Carrefour said “We invested 1.5 trillion won in Korea. Investment profits are not big.”

Meanwhile, National Tax Service (NTX) began investigation of capital gains for selling shares, finding out the whereabouts of Philippe Broianigo, the representative director of Carrefour Korea, and other French directors.

Also, NTX is projected to embark upon an investigation into tax evasion allegations raised against Carrefour.

With take over of Carrefour by E-Land, the discount industry will stay largely unaffected unlike general expectations from the industry.

Had Samsung Tesco, Korea`s second largest discount chain or Lotte Shopping, the third largest discount chain, won the bid, fierce competition with Shinsegae E-mart, the largest in the industry, would be inevitable.

Although E-Land runs Kim’s Club, a discount chain, it is virtually a large supermarket. Taking over Carrefour is actually entering the discount chain business for E-Land.

For this reason, officials of Shinsegae are saying, “We are satisfied as if we had won the bid.”