Shinsegae will acquire the Lotte Department Store Centum City, which has been operating in Haeundae District, Busan, for 19 years. Shinsegae plans to integrate the two neighboring department stores and develop a mixed-use complex with hotels and office and residential facilities, transforming the Centum City area into a large-scale 'Shinsegae Town.'
The sales gap between the two stores exceeded 16 times last year, prompting a restructuring in Busan's retail sector. While Shinsegae aims to expand its business scale, Lotte will focus on strengthening the competitiveness of its key stores, including its Busan headquarters.
On October 29, Shinsegae signed the acquisition agreement for the Lotte Department Store Centum City and submitted a merger notification to the Fair Trade Commission. The Lotte Centum City store will continue normal operations until the transaction is finalized.
This acquisition comes amid a significant sales gap between the two competing department stores in the same market.
According to a report by NICE Credit Rating released on October 30, Shinsegae's Centum City store is projected to generate sales of 2.26 trillion won in 2025, ranking third among department stores nationwide.
In contrast, Lotte Department Store Centum City is expected to record sales of 135.2 billion won, placing it 62nd nationally. The sales difference amounts to approximately 2.13 trillion won, with Shinsegae's sales being about 16.7 times that of Lotte.
Opened in 2007, Lotte Centum City has competed with Shinsegae Centum City, which opened in 2009, in the eastern Busan market.
From the outset, Shinsegae Centum City has enhanced its shopping experience by integrating leisure and cultural facilities, such as Spaland and an ice rink. In 2016, it became the first local department store to surpass 1 trillion won in annual sales and has recorded over 2 trillion won in sales for three consecutive years since 2023.
NICE Credit Rating analyzed that Shinsegae Centum City has secured high customer attraction competitiveness due to its luxury brand offerings and leisure facilities, while Lotte Centum City has faced relative challenges in securing sales and profitability.
Lotte Shopping plans to concentrate its efforts on key regional stores, including its Busan headquarters and Lotte Mall Dongbusan in the Osiria tourism complex, following this sale.
The acquisition price for this transaction has not been disclosed. However, NICE Credit Rating estimates that the acquisition amount will not significantly exceed 200 billion won, based on the book value of Lotte Centum City and the scale of bids during previous sale attempts.
According to Lotte Shopping's audit report, the book value of Centum City is 205 billion won, which includes land valued at 142.4 billion won and a building valued at 62.6 billion won. NICE Credit Rating also considered that the participation amounts in the main bidding during the 2024 sale attempt were reported to be around 250 billion to 300 billion won.
Given Shinsegae's financial capacity, it is assessed that this acquisition will have a limited impact on its corporate credit rating.
NICE Credit Rating noted that as of the end of June this year, Shinsegae's consolidated debt ratio was 121.2%, with cash and cash equivalents amounting to approximately 1 trillion won, indicating strong financial stability. Lotte Shopping is also expected to experience limited effects on its credit rating considering the scale of the sale proceeds.
However, it was noted that the additional investment burden from store renovations and the mixed-use development of the Centum City C site, which Shinsegae plans to pursue after the acquisition, will need ongoing assessment.
Shinsegae's vision for 'Shinsegae Town' goes beyond merely integrating the existing department store and Lotte Centum City. Shinsegae intends to revamp the acquired store into a mixed-use space that combines shopping, culture, and leisure, operating in conjunction with the existing Shinsegae Centum City.
The C site will be developed into a mixed-use project featuring a luxury hotel, prime offices, and premium residences. NICE Credit Rating's report from October 30 indicated that construction on the C site is scheduled to begin in the second half of 2027.
Since the opening of Centum City Mall in 2016, Shinsegae has continued to develop surrounding areas, aiming to establish a mixed-use commercial district that integrates shopping, business, accommodation, and residential functions through this acquisition.
In particular, Shinsegae plans to organically connect the existing department store, the acquired store, and the C site development facilities to cultivate a large-scale lifestyle hub that caters to both domestic and international tourists and business visitors.
Park Joo-hyung, CEO of Shinsegae, stated, "This acquisition signifies that both companies have created a management environment where they can develop beyond competition."
He added, "With this acquisition, we will develop Shinsegae Centum City into a global landmark representing South Korea, where shopping, culture, tourism, and urban spaces are organically integrated."
The Lotte Department Store Centum City will continue normal operations until the Fair Trade Commission's merger review and related procedures are completed and the transaction is finalized.
* This article has been translated by AI.
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