On the afternoon of the 25th, near Yeongdeungpo Station on Subway Line 1. /Courtesy of Bang Jae-hyuk.

This article was published on Apr. 17, 2025, at 8:14 a.m. on the ChosunBiz MoneyMove site.

Korea Railroad Corporation (KORAIL) is pushing for the divestiture of its equity in privately-operated railway stations. This is due to the significant increase in expenses such as electricity rates and wage hikes while railway fares have been frozen for an extended period, leading to a decline in financial health. It is expected that the company will focus on selling stations that have generated operating profit and paid dividends until now.

According to the investment banking (IB) industry on the 17th, KORAIL will begin the divestiture process for four out of the 11 privately-operated railway stations in which it currently holds equity. The stations included in this sale are LOTTE Station, Hanwha Connect, Shinsegae Uijeongbu Station, and Bupyeong Station, with KORAIL aiming for a total equity sale amount of about 130 billion won.

KORAIL attempted to sell its equity in this stake last year but had to cancel due to not finding any prospective buyers. This year, unlike last year when a public competitive bidding was held, it is expected to proceed with the divestiture process by first engaging in pre-marketing efforts and then discreetly contacting potential buyers. There are plans to gauge the intentions of private corporations regarding acquisitions and proceed with bidding accordingly.

However, as losses at privately-operated stations including LOTTE Station are widening and the existing joint venture partners, LOTTE and Hanwha Group, have shown no intention to acquire equity, the sale is likely to take some time. It has been reported that not a single prospective buyer participated in last year's bidding.

Privately-operated railway stations are operated in a form where KORAIL and private corporations establish a joint venture to carry out development projects. KORAIL allows the development of land within its railway sites into privately-operated stations, while the private companies distribute profits generated from the development as dividends.

The first privately-operated railway station in Seoul is Yeongdeungpo Station. Previously, KORAIL and LOTTE Group established LOTTE Station in September 1986, aiming for main business purposes including construction and operation of privately-operated stations and department stores. As of the end of last year, LOTTE Station recorded sales of 100.6 billion won and a net loss of 26.3 billion won. Currently, KORAIL and LOTTE Corporation and related entities hold 25% and 68% of the equity, respectively.

Hanwha Connect (formerly Hanwha Station) operates Seoul Station and Cheongnyangni Station. Last year's sales and net profit for Hanwha Connect were about 184.4 billion won and 23.4 billion won, respectively. Hanwha Solutions is the largest shareholder with a 48.31% stake, while KORAIL holds a 30.07% stake as the second-largest shareholder. KORAIL plans to include the sale of 1,772,995 shares of Hanwha Connect, valuing each share at approximately 29,000 won, totaling around 51 billion won.

The Shinsegae Uijeongbu Station, established in November 2002, and Bupyeong Station are also included in the sale. Shinsegae Uijeongbu Station holds a 27.55% equity stake, while Bupyeong Station has a 25% stake held by Daea Corporation. KORAIL plans to divest 176,000 shares (100,725 won per share) of Shinsegae Uijeongbu Station and 88,000 shares (142,563 won) of Bupyeong Station.

However, since last year, existing operators like LOTTE Group and Hanwha Solutions did not participate in the acquisition race, it is reported that KORAIL will seek prospective buyers mainly focusing on strategic investors (SI) who can collaborate with them.