Lotte outbids PE, strategics for KT Rental with $908m deal
Lotte Group has agreed to buy South Korean car rental firm KT Rental from KT Corp. and other investors for KRW1.02 trillion ($908 million), beating out several other private equity and strategic players.
Lotte, a Korean conglomerate with interests spanning tourism, construction, food and finance, announced the acquisition in a regulatory filing. KT Corp. said in a separate filing that it would sell its 58% stake in the rental business for KRW772.1 billion. The deal is expected to close by the end of May.
Affinity Equity Partners was one of a reported six bidders for KT Rental, which was put up for sale last year. The others were said to include SK Networks, Hankook Tire and a consortium comprising MBK Partners and local counterpart IMM Private Equity. Lotte said in February that it had been chosen as the preferred bidder.
MBK's ties to the company date back to 2010 when Kumho Asiana, needing to offload assets in order to service debts incurred by the highly-leveraged purchase of Daewoo Engineering & Construction, put Kumho-Rent-A-Car on the block. MBK and KT Corp. bought the asset for a reported valuation of KRW300 billion.
Kumho-Rent-A-Car was merged with KT Corp's own auto rental unit and MBK exited the business two years later. The PE firm sold its stake to KT Corp, which then offloaded the position to several financial institutions.
KT Rental, which is Hertz Rent-a-car's exclusive Korean partner, claims to have 170 branches and sales offices nationwide and more than 100,000 vehicles in operation. Revenue came to KRW8.8 billion in 2013. It is the domestic market leader ahead of AJ Rent A Car. The latter's parent, AJ Networks, received a $60 million investment from Standard Chartered Private Equity last year.
The divestment comes as KT Corp. looks to strengthen its balance sheet and refocus on telecommunications by offloading its non-core assets. Meanwhile, Kumho Asiana is in the process of rebuilding its former empire. This week the company agreed to buy back Kumho Buslines from a fund operated by IBK Capital and Kstone Partners.
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