South Korea’s LG Corp., the holding company of the country’s large conglomerate LG Group, is in the final stage of talks to purchase STX Namsan Tower from KORAMCO REITs Management and Trust Co. for an undisclosed amount, according to the industry source on Wednesday. The local investment banking industry estimates the deal would reach around 300 billion won ($260.7 million), which could be the biggest real-estate deal for LG Group that has been shy about merger and acquisition activities.

According to industry sources, LG Corp. is expected to conclude the deal with KORAMCO to buy the building this or next month. Details including the price are not disclosed.

STX Namsan Tower, located in downtown Seoul, is a 23-story building with six underground floors, covering a floor area of 67,295 square meters. KORAMCO previously named Korea Investment Management Co. as a preferred bidder for the building buyout last September, but their negotiations fell through because of failed funding.

Once LG acquires the building, it is expected to use the tower to house the units and divisions of LG Group affiliates, such as LG Electronics Inc., LG Chem Ltd. and LG Innotek Co., that are currently scattered across different buildings in Seoul in a bid to reduce rent costs. The acquisition is also expected to help LG Corp. to earn additional revenue by renting out the building to its affiliates. The holding company relies on property leasing, dividend payouts from its affiliates and royalties for its brand usage as its main source of income.

It is the first time for LG Group to buy real estate since it changed into a holding company following the 1997 Asian financial crisis. Industry sources also note that the conglomerate has recently turned more active in mergers and acquisitions as seen in recent buyouts by its affiliate LG Chem and LG Household & Health Care Ltd.

By Lee Seung-hoon

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