[THE INVESTOR] South Korean discount chain operator E-mart has acquired shares of Shinsegae group worth around 34.3 billion won (US$30.58 million) from its owner family, which includes Chairwoman Lee Myung-hee, her husband Chung Jae-eun and son Chung Yong-jin.

“The acquisition was to simplify our corporate governance and also strengthen E-mart’s influence over Shinsegae affiliates,” an company official said in a statement.

 

With the stake sale, the group’s owner family no longer owns shares of three affiliates -- Shinsegae I&C, Shinsegae Engineering & Construction and Shinsegae Food.

At the same time, E-mart’s stake in Shinsegae I&C increased from 29.01 percent to 35.65 percent and in Shinsegae Engineering & Construction jumped from 32.41 percent to 42.7 percent. The retailer’s stake in Shinsegae Food also increased to 46.87 percent from the purchase.

Some sources say that the recent transaction reflects E-mart’ efforts to increase influence over affiliates before turning the discount chain operator into a holding firm. The Korean government has said it would toughen the requirements for becoming a holding firm so that they must hold a minimum 30 percent stake in affiliates, up from the current 20 percent.

The acquisition is also a part of the group’s move to prevent violating laws related to unfair intra-affiliate transactions, which is expected to become increasingly strict. Shinsegae Group Chairman Chung Yong-jin holds more than 10 percent stake in Shinsegae Engineering & Construction. A listed company with an owner holding more than 30 percent stake is banned from doing business transactions with affiliates, which so far has been a common way to help affiliates make money and keep sales within the conglomerate.

By Song Seung-hyun (ssh@heraldcorp.com)