Lotte Confectionery to acquire majority stake in Kazakhstan candy firm Rakhat

South Korean confectioner Lotte Confectionery has entered into an agreement to acquire a 76.2% stake in Kazakhstan-based candy firm Rakhat in a deal worth $156.6m.

The deal is part of Lotte’s strategy to become the largest confectioner in Asia by 2018.

Under the agreement, Lotte will acquire the stake in Rakhat from the company’s chief executive officer and family, which hold about 30% stake in the company, and the UK-based private equity firm BD Associates, which owns around 30%.

In order to meet the regulations in the country, Lotte will purchase the remaining shares from the market by the end of 2013.

The acquisition of Rakhat, which holds a 20% share in the Kazakhstan’s market, will expand Lotte’s presence beyond Vietnam, India, Russia, China, Belgium and Pakistan, and is expected to be completed by the end of this year.

Lotte, the gum and snack manufacturing unit of South Korean conglomerate Lotte Group, said that the company intends to expand into the Commonwealth of Independent States (CIS) region by foraying into the Kazakhstan marketplace.

Kazakhstan is an attractive market for Lotte as there is a significant demand for chocolate and candy in the country, compared with that in South Korea, reported The Wall Street Journal citing a source familiar with the deal.

Lotte Confectionery reported a net profit of KRW89.8bn ($78.6m), while net revenues totalled KRW1.86trn ($1.62bn) in the fiscal year 2012.

In 2011, Lotte Confectionery acquired a majority stake in KS Sulemanji Esmailji, a Pakistani confectioner, for $18m.

Headquartered in Seoul, Republic of Korea, Lotte Confectionery offers about 200 varieties of products including chewing gum, chocolate, cookies, ice cream, candies, biscuits, crackers, snacks and health foods.

The company manufactures and sells various health products that contain vitamins, minerals, granules, and animal plant extracts under the Health 1 brand.