[Edaily Marketin Reporter Song Seung-Hyeon ] The sale of Lotte Rental’s controlling stake is shifting from a situation where private equity fund (PEF) manager Texas Pacific Group (TPG) was the sole bidder to a competitive bidding process. The situation is becoming more complicated following reports that Korea & Company is exploring a potential acquisition of Lotte Rental. However, since both companies face the same hurdle—a corporate merger review by the Fair Trade Commission—there is a possibility that the bidding war could drag on for some time.

According to investment banking (IB) industry sources on the 6th, Lotte Rental announced in a follow-up disclosure on the 31st of last month, “We have held discussions with TPG regarding the sale of shares, including due diligence, but no specific details have been finalized yet,” and extended the deadline for the follow-up disclosure to October 30—three months from now. Compared to its initial announcement on July 1, in which it had promised to provide an answer “within one month,” the negotiation timeline has effectively been pushed back. Although the possibility of signing a share purchase agreement (SPA) by the end of July was discussed, it ultimately fell through.

The apparent sticking points appear to be price and transaction structure. The sale price for the 61.18% stake (approximately 22.21 million shares) held by Hotel Lotte and Busan Lotte Hotel is reportedly in the mid-to-high 50,000 won range per share, totaling in the low-to-mid 1 trillion won range. This is 20–30% lower than the 77,115 won per share agreed upon with Affinity Equity Partners. Although not yet formalized, if TPG were to purchase the 38.82% stake held by minority shareholders at the same price due to mandatory tender offer pressure, the total acquisition cost would rise to around 2 trillion won. This has led to speculation that there may be disagreements over the price.

Furthermore, investment banking and legal circles speculate that TPG’s stake in Kakao Mobility may be another factor behind the protracted negotiations. TPG became the second-largest shareholder of Kakao Mobility after investing approximately 600 billion won in two rounds in 2017 and 2021. Although TPG is pursuing an exit, the timing of its capital recovery continues to be delayed because a domestic listing has been blocked by controversies over dual listings and accounting audits, and it has not been able to finalize a U.S. listing or a secondary sale.

The problem is that this stake could become a regulatory risk beyond just a capital recovery burden. A legal industry source stated, “While TPG has no domestic car rental assets and is therefore free from concerns about combined market share, its structure—controlling both a taxi-hailing platform through Kakao Mobility and car rental and car-sharing (Green Car) services through Lotte Rental—makes it highly likely that competition authorities will scrutinize the deal.”

Hankook & Company Group has moved to capitalize on this opening. It is reported that Hankook & Company, along with Lotte Rental, is also eyeing SK Rent-a-Car as it considers entering the car rental market. Since Chairman Cho Hyun-beom was released on parole on the 30th of last month, resolving the leadership vacuum, this would mark his first major deal since his release if it goes through. The move is seen as part of a strategy to expand its mobility portfolio by adding vehicle operations and data to its existing tire and Hanon Systems thermal management businesses.

The stumbling block is that the Korea Fair Trade Commission (KFTC) has already blocked a scenario involving the simultaneous acquisition of the market’s top two players. Last January, the KFTC prohibited Affinity from acquiring Lotte Rental. The reason cited was that if Affinity, which already owns SK Rent-a-Car, were to acquire the market leader as well, its combined market share in long-term car rentals would reach 38.3%, and its share of the domestic short-term car rental market would reach 29.3%. Since the market structure would remain the same after the merger—with only the acquirer changing—a scenario in which Korea & Company acquires both companies together is highly likely to face the same obstacle.

However, there is a key difference. At the time, the Fair Trade Commission opted for a structural ban rather than conditional approval, stating, “Given the nature of private equity funds, which aim to sell their holdings after a certain period, it is difficult to guarantee the permanence of behavioral remedies.” Since Korea & Company is a strategic investor (SI) rather than a financial investor (FI), it is possible to interpret that the door is relatively open for conditional approval, provided that corrective measures—such as price increase restrictions—are implemented. Of course, this is an issue that must be addressed after the assessment of anti-competitive effects.

An investment banking industry official commented, “We had expected the SPA to be signed soon given TPG’s determination to acquire the company, but the process has been delayed, and with Korea & Company now being mentioned, Lotte’s calculations have likely become more complicated.” The official added, “Since they announced in their disclosure that they will make another announcement in three months, this period appears to be a turning point.”