March 23, 2015 / 9:00 AM / 4 years ago

UPDATE 1-S.Korea's Hotel Shilla to buy stake in US duty-free firm

* Shilla gains retail foothold in U.S.

* S.Korea is world’s biggest duty free market

* Shilla, rival Lotte expanding abroad as competition grows (Adds Shilla expansion, Korean duty free market details)

By Joyce Lee

SEOUL, March 23 (Reuters) - Hotel Shilla Co Ltd said it would buy a 44 percent stake in U.S. in-flight duty free retailer DFASS for $105 million, the latest push abroad by a South Korean duty free store operator amid intensifying competition at home.

Shilla, a hotel and retail unit of Samsung Group and the world’s No.7 duty free retailer by revenue, has an option to buy an additional 36 percent of DFASS in five years, it said in a statement.

Miami-based DFASS operates more than 25 duty free shops in the United States, Latin America and the Caribbean as well as in-flight duty free services, according to its website.

DFASS reported sales of $518 million in 2014, Hotel Shilla said.

It is Shilla’s first retail asset in the United States. It also has a U.S. travel unit as well as duty free shops in Singapore and Macau.

South Korean duty free operators have flourished in tandem with growth in the domestic duty free market - the world’s biggest with 8.3 trillion won ($7.5 billion) in 2014 sales and which continues to have a rosy outlook due to a surge in Chinese tourists.

But fierce competition between Shilla and larger local rival Lotte Duty Free, part of Lotte Shopping, as well as the South Korean government’s policy of earmarking some new licenses for smaller firms, has led both to seek expansion abroad.

Lotte has been bidding for new licenses in overseas airports and has opened shops in Jakarta, Singapore, Guam and Osaka.

Lotte Duty Free remains interested in the possible acquisition of Italy’s World Duty Free SpA, a Lotte spokesman said on Monday, without elaborating. ($1 = 1,113.4100 won) (Reporting by Joyce Lee; Editing by Tony Munroe and Edwina Gibbs)

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