SOUTH KOREA/AUSTRALIA/NEW ZEALAND. Lotte Duty Free CEO Jang Sun-wook today announced that the company has signed the main contract to acquire James Richardson Pty Ltd’s Australian and New Zealand duty free business, trading as JR/Duty Free.
The parties aim to conclude the agreement* by year-end.
The news comes precisely one week after JR/Duty Free issued a statement exclusively through The Moodie Davitt Report confirming that it was in talks with the Korean travel retail giant regarding a sale of its Australian and New Zealand operations only.
If, as expected, the deal is completed, the acquired business will comprise on-airport stores in Brisbane, Darwin, Wellington and Canberra and the much-respected independent retailer’s downtown store in Swanston Street, Melbourne.
The transaction excludes JR’s interests in its thriving duty free businesses in Israel and Tahiti. [The Moodie Davitt Report understands separately that the agreement also excludes JR Duty Free’s business at Christchurch Airport, which is currently out to tender and subject to an imminent award to another party. As reported, JR chose to exit its Perth Airport contract by year-end, a concession that was subsequently awarded to Dufry.]
Australia and New Zealand present great growth opportunities for Lotte Duty Free, the parties said. The Australian duty free market generated total sales of over KRW1.35 trillion (US$1.2 billion) last year, they noted, and continues to grow thanks to annual visitor growth exceeding +10%.
This momentum is supported by Chinese visitor arrivals to Australia increasing by over +20% year-on-year. “International travel retailers such as Gebr. Heinemann, Dufry, DFS and Aelia Duty Free operate duty free businesses in Australia signalling the importance of the region to global players,” a statement said.
Starting with the acquisition of JR/Duty Free, Lotte Duty Free said that it aims to become the number one global travel retailer by 2023. Lotte Duty Free currently has seven overseas operations – in downtown Jakarta, Indonesia; Guam Airport; Kansai Airport, Japan; Tokyo Ginza; Bangkok downtown; and Da Nang and Nha Trang Cam Rhan airports in Vietnam. According to the retailer’s first-half 2018 report, offshore sales grew +60% year-on-year.
At the signing ceremony, Lotte Duty Free CEO Jang described the agreement as a key stepping stone for the company’s expansion outside South Korea. He said, “Lotte has been assessing this opportunity and entry into the region for a number of years. The acquisition is an important strategic milestone, as Lotte Duty Free becomes the first Asian player to operate duty free in Australia and New Zealand. The company will continue to seek overseas expansion in order to *achieve the title of world’s best travel retailer.
“We acknowledge the expertise in the Melbourne-based JR/Duty Free team and are pleased that the business will continue to operate out of its Melbourne headquarters.”
James Richardson Pty Ltd Chairman Evelyn Danos stated: “In reaching this decision, our shareholders took into consideration the changing nature of the duty free business at airports in Australia in recent years. After various approaches and then conducting a strategic review, it was concluded that a regional business such as JR/Duty Free in Australia and New Zealand would be most valuable in the long term as part of a strong multinational, with greater buying power and the ability to invest in expanding infrastructure and technology.
“I believe this transaction offers enormous opportunity for our stakeholders including employees, airports and importantly our customers.”
*While the deal is still subject to several conditions, both Lotte Duty Free and JR/Duty Free said that they are confident of the transaction’s success.