CJ Logistics Corp., South Korea’s largest parcel delivery service company under food and entertainment conglomerate CJ Group, will merge with the group’s construction arm in a share swap deal at a ratio of 1 to 0.053716.

CJ Logistics said in a regulatory filing on Tuesday that it will grant total 529,398 shares worth 80.3 billion won ($73.9 million) to CJ Corp. that owns a 99.9 percent stake in CJ E&C in exchange for a merger with the construction affiliate. Following the swap deal, CJ Logistics will operate CJ E&C.

CJ Logistics expects great synergy from the marriage that will combine its renowned logistics center designing capability backed by its unique technology, engineering, system and solution (TES) and CJ E&C’s expertise in building distribution centers, which would help it establish more advanced infrastructure and upgrade its logistics services.

An unnamed official from CJ Logistics also expected the company would benefit from the latest deal amid growing demand for in-house construction services. The logistics company is currently building a mega hub terminal in Gonjiam, Gyeonggi Province, and other distribution centers at home and abroad.

CJ E&C, a construction arm of CJ Group, was founded in 1995. Last year, it raised 12.2 billion won in operating profit on sales of 642 billion won.

In a separate regulatory filing, CJ CheilJedang Corp., a food company under CJ Group, announced that it will secure an additional 20.1 percent shares in CJ Logistics and transform the entity into an independent subsidiary.

CJ CheilJedang said that it has decided to purchase 20.1 percent shares of CJ Logistics from KX Holdings Co., former CJ GLS Corp., and the following the deal, the food company’s stake in the logistics company will rise to 60.3 percent.

When CJ Group took over Korea Express in 2011, CJ CheilJedang and KX Holdings each received 40.2 percent and 20.1 percent shares in the group’s new logistics arm. In the latest deal, Youngwoo Frozen Foods Co., a subsidiary of CJ CheilJedang, acquired KX Holdings, and then CJ CheilJedang remerged with Youngwoo Frozen Foods to add CJ Logistics’ 20.1 percent stake to its portfolio.

The food company expects its enhanced relationship with its logistics and construction arms that are aggressively seeking to go global would help enhance its global competitiveness.

Shares of CJ Logistics were down 1,500 won or 0.99 percent to 150,500 won as of 3:15 p.m. on Tuesday, and CJ CheilJedang down 28,500 won or 7.15 percent to 370,000 won.

By Kim Byung-ho and Lee Eun-joo

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