E-Mart in exclusive talks to buy US food company

South Korea's largest supermarket chain E-Mart Inc. has spent nearly $4 billion on acquisition deals so far this year, including the $3 billion purchase of eBay Korea.

The key arm of Shisegae Group has yet to lose its appetite for new M&As. It is now trying to buy a US food and beverage (F&B) franchise operator worth several hundred million dollars, investment banking sources said on Dec. 27.

"E-Mart is in exclusive negotiations with a large F&B company based in California," an investment banking source told The Korea Economic Daily on Dec. 27.

"The new M&A target will help improve its product mix and boost the competitiveness of the company's retail channels," he said.

Early this month, E-mart's Chief Executive Kang Heui-seok took a business trip to California in secrecy, accompanied by the company's in-house M&A specialists, according to the sources.

The possible acquisition of a US food company could be funded by an initial public offering of SSG.COM, the e-commerce brand, 50.1% owned by E-Mart.

SSG has embarked on the process to go public next year, with its valuation estimated at 6 trillion won. Shinsegae owns another 26.9% stake in the online platform.

ON BUYING SPREE

E-Mart and its parent company Shinsegae Group were among the most aggressive buyers in the country's M&A market this year. 

Its series of acquisitions ranged from a fashion app to a baseball club and from online to offline channels. Its expansionary move is seen as part of an effort to better compete with online giants such as Naver Corp. and Coupang Corp., which have been sprawling into the retail market.

Behind the M&A deals was CEO Kang, an ex-partner of Bain & Co. The former consultant previously worked at the Ministry of Food, Agriculture, Forestry and Fisheries for about 10 years, after passing the higher civil service examinations.

Since Kang was installed as CEO in late 2019, E-Mart has sold a number of key real estate properties to raise cash to acquire eBay Korea and the fashion company W Concept, as well as an additional stake in Starbucks Korea. Recently, it offloaded its headquarters building in Seongsu-dong, Seoul for 1.2 trillion won ($1 billion).

The company's debt amounted to 7.9 trillion won as of end-September, equivalent to 82.8% of its equity.

Shinsegae Group's M&A deals in 2021:

Investment target/details	Acquisition price	When
Baseball club SK Wyverns	100 billion won	February
Share swap deal with Naver Corp.	250 billion won	March
W-Concept	270 billion won (estimated)	May
17.5% stake in Starbucks Korea	474.2 billion won	July
eBay Korea	3.6 trillion won	November

Additionally, E-Mart 24 Inc., a convenience store operator, is touted as a potential buyer of Ministop Korea, put up for sale t by Japan's Aeon Co., in a deal estimated at around 200 billion won.

VENTURE CAPITAL INVESTMENT

E-Mart is also preparing to launch a venture capital unit within the company to chase startups in new business areas and now hiring venture capitalists, said a VC industry source.

"E-Mart is keen on new businesses such as the alternative meat market where it entered this year," another IB source said.

"CEO Kang seems to believe the company has done with the integration of its online and offline channels and now is the time to take the next step," he added.

Earlier this year, Shinsegae Group withdrew its bid for South Korea’s second-largest food delivery platform Yogiyo in the final round. Its strategic division, headed by the group Chairman Lee Myung-hee, vetoed the proposed acquisition for financial reasons, because it came on the back of its $3 billion purchase of eBay Korea, according to the IB sources.

Write to Dong-hui Park at donghuip@hankyung.com
Yeonhee Kim edited this article.