Hyundai Dept. Store to buy Zinus for $735 mn

South Korea’s major retailer Hyundai Department Store Group is set to buy Zinus Inc., a maker of best-selling mattresses in North America for 894.7 billion won ($734.8 million) in a bid to expand its business into overseas markets.

Hyundai Department Store Co. decided to purchase a 30% stake in Zinus Inc. from its founder Lee Youn-jae and others for 774.7 billion won and invest 120 billion won in the mattress maker’s new shares, according to a filing to a local financial regulator on Tuesday. Zinus plans to build a new factory in Indonesia and improve its financial structure with the proceeds.

The department store operator is expected to secure the global online business opportunities from the investment, the group’s largest acquisition.

Zinus’ flagship mattresses priced at around $200 are dubbed “Amazon Mattresses,” becoming one of the most popular in overseas markets. They topped Amazon’s best-selling mattress list at the end of 2021, accounting for more than 30% of the US online mattress market.

Hyundai Department Store Group, South Korea’s 21st-largest conglomerate, raised its sales to 25 trillion won last year from 7.8 trillion won in 2010.

But investors were not satisfied. Hyundai Department Store’s share price closed at 76,600 won on Tuesday less than half of around 190,000 won in 2013. Investors have undervalued the stock as the company relied only on domestic retail and offline businesses, analysts said.

The takeover of Zinus is likely to ease such concerns, they added.

OVERSEAS, ONLINE BUSINESS

Zinus logged 74.3 billion won in operating profit last year with sales of 1.1 trillion won. Its overseas business and online sector accounted for 97% and 80% of the total sales, respectively, which will help create synergy with the group’s e-commerce business.

Hyundai Department Store has been focusing on specialized items in specific categories, a different strategy from its larger rivals such as Shinsegae Inc. and Lotte Shopping Co.

Hyundai Department Store proved its effectiveness through its acquisition of Handsome Corp., a local fashion powerhouse. Handsome earned profits stably through sales at department stores and invest the proceeds in raising online sales. Its online sales made up 20.8% of the total revenue of 1.4 trillion won in 2021, while its operating profit margin jumped to 11% from 7% in 2018.

The group applied the same strategy in its furniture, interior and building materials businesses. Thanks to the scheme, Hyundai Livart, its furniture unit, and Hyundai L&C, its interior unit, reported sales of 2.5 trillion won in total last year.

“We plan to expand Zinus’ products from mattresses to other furniture, for living rooms, home offices and exterior areas, through cooperation with other affiliates,” said a Hyundai Department Store source. “We will also expand Zinus’ business structure centered in North America to Europe, South America and Japan, etc.”

With the takeover, Hyundai Department Store Group is one step closer to its goal of raising the group’s sales to 40 trillion won by 2030.

The group has been investing 2.3 trillion won in acquisitions, including the Zinus deal, since 2012 when it bought Handsome.

Write to Dong-Hui Park at donghuip@hankyung.com
Jongwoo Cheon edited this article.