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Lotte Rental Buys 17.91% Stake in Socar: Financial and Strategic Implications

Source: Socar

Seoul, South Korea- Lotte Rental acquires significant stake in Socar: What it means for the mobility business.

The Key Points

  • Lotte Rental will acquire 5,872,450 shares, a 17.91% stake, in mobility platform Socar from SK Inc. This represents a 40-55% premium to Socar's current share price of KRW 16,110.
  • The transaction value ranges from KRW 132.1 billion to KRW 146.2 billion and is expected to close in September 2024.
  • The deal aims to strengthen Lotte Rental's mobility platform capabilities and make it the second-largest shareholder of Socar.
  • SK Inc. will realize a 148% return on its investment in Socar, continuing a series of divestments amid investment commitments.

What Strategically made Lotte move?

The move underscores Lotte Rental's goal of strengthening its mobility business.

Despite being the market leader in car rental, the company still needs to identify a gap in its platform capabilities.

Lotte Rental aims to fill this gap by leveraging Socar's existing customer base of 13 million members and integrated services such as "Modu Parking" and "Elecle.

From an investor perspective, KRW 22,500 per share is about 20% lower than Socar's IPO price of KRW 28,000.

However, it's higher than the market closing price, an increase that Lotte Rental attributes to the acquisition size.

After the purchase, Lotte Rental will become Socar's second-largest shareholder with a 32.9% stake.

What Made SK to divest its share?  

Meanwhile, SK Inc. is expected to realize a 148% return on its investment in Socar, which it originally acquired for KRW 59 billion in 2015.

This deal follows SK Inc.'s pattern of divestments, including the recent sale of its stake in U.S.-based Turo for KRW 88.1 billion, which yielded a 121% return.

These moves indicate SK Inc.'s need for liquidity, especially as the company has significant upcoming investments in batteries and chips, many of which are U.S.-focused.

The conclusion for Lotte and SK

This acquisition is significant for Lotte Rental as it intensifies its focus on becoming an integrated mobility platform.

For SK Inc., the deal provides significant financial returns, freeing up capital for other high-value investments.

As the mobility landscape evolves, this transaction will have notable implications for the automotive and technology sectors.