Shinsegae guarantees PE firms’ SSG.COM exit amid delayed IPO

Shinsegae Inc. and its supermarket chain operator E-Mart Inc. will bring in at least one investor by the end of this year to buy shares in SSG.COM from Affinity Equity Partners and BRV Capital Management to ensure the two private equity firms’ divestment from their e-commerce platform.

The two retail companies under Shinsegae Group said in regulatory filings on Tuesday that they have reached an agreement with Affinity Equity and BRV Capital to notify them by the end of this year of at least one new investor to buy back their shares in SSG.COM, in a deal estimated at around 1 trillion won ($726 million).

If Shinseage and E-Mart fail to attract a new third-party investor by the agreed deadline, they will directly purchase the stakes from the two investment firms, according to their filings.

E-Mart and Shinsegae are SSG.COM’s two largest shareholders, owning 45.6% and 24.4%, respectively.

Affinity Equity and BRV each hold a 15% stake in SSG.COM after injecting a total of 1 trillion won into the online shopping mall between 2019 and 2022.

Affinity Equity and BRV earlier demanded that Shinsegae and E-Mart buy back their stakes in the online retailer as agreed under put options contracts that expired on May 1, 2024.

They had bought shares in SSG.COM on the condition that the online shopping mall’s gross merchandise value surpass 5.16 trillion won by 2023, or be eligible for an initial public offering before their put option contracts expire.

With the agreement, Shinsegae Group and the two private equity houses would avoid entering a legal battle over the e-commerce operator.

However, some industry observers are doubtful if Shinsegae Group can draw a new investor in SSG.COM, given its accumulated losses and dwindling market share. The rapid growth of domestic rivals such as Coupang Inc. and the ascent of cheap-price online retailers from China dim its business outlook.

If Shinsegae and E-Mart fail to attract a new buyer of SSG.COM shares, they must bear the cost of about 1 trillion won, dealing a heavy blow to the already struggling retail group.

Write to Jong-Kwan Park at pjk@hankyung.com

Yeonhee Kim edited this article.