AEON struggling to unload Ministop Korea
Japanese retailer AEON is having a difficult time selling Ministop Korea, due to the convenience store chain’s deteriorating bottom line amid the minimum wage hike and fiercer competition, industry analysts said Thursday.
They said the largest shareholder of Ministop Korea and its advisory firm Nomura Securities signed a non-disclosure agreement recently with several prospective buyers and sent an investment memorandum to them. AEON reportedly hired Nomura as its advisory firm in August to sell Ministop Korea.
Although Ministop Korea CEO Shim Kwan-sup said in July that the convenience store chain’s Japanese headquarters had decided nothing about the sale of the Korean subsidiary, Shinsegae and several other local convenience store operators have been mentioned as prospective buyers.
However, the analysts reportedly regard Ministop Korea as overpriced.
They said AEON wants to sell Ministop Korea for 400 billion won ($354 million), but the prospective buyers estimate its price at 300 billion won, citing its worsening profitability.
Ministop Korea posted 2.6 billion won in operating profit last year, down 23 percent year-on-year. Its ratio of operating profit to sales has been below 1 percent over the past few years, as the figure was 0.22 percent last year and 0.29 percent in 2016.
The number of Ministop convenience stores here is also smaller than that of Shinsegae’s emart24.
The minimum wage hike and government regulations on opening of new convenience stores will likely hurt Ministop Korea’s profitability further.
“The nation’s convenience stores will undergo restructuring this year,” Hana Investment & Securities analyst Park Jong-dae said. “With the oversupply and minimum wage hike, their restructurings have become bigger and faster.”
Domestic convenience store operators have therefore remained reluctant to open additional stores to improve their profitability in recent days. For example, BGF Retail running CU decided to apply stricter standards to those who seek to open CU convenience stores, following changes in the business environment.
“The prospective buyers seem to take a wait-and-see attitude to avoid risks,” a retail industry official said. “The sale of Ministop Korea will likely take a long time to be finished.”
Against this backdrop, companies that are mentioned as prospective buyers have claimed they are not considering acquiring the convenience store chain.
“We cannot afford acquisition of Ministop Korea for now, and we put the top priority on stabilization of our business,” an emart24 official said.
Hyundai Department Store Group has also denied rumors it is considering taking over Ministop Korea.
Domestic convenience store operators have been cautious about purchasing Ministop Korea, because the acquisition may go against the nation’s antitrust law.
Due to their denials of acquisition, some observers said AEON intentionally spread the rumors to raise the value of Ministop Korea. They said AEON wants Shinsegae and global private equity firms to bid together.