SEOUL (Bloomberg) -- South Korea’s Lotte Group has agreed to buy more than 50 percent of Cosmo Investment Management Co., the nation’s largest investment consulting firm, from Japan’s Sparx Group Co.

The exact size of the stake and the price have yet to be decided, Seoul-based Lotte, the industrial group centered on South Korea’s biggest department-store chain, said on Monday in an e-mailed statement. Lotte and Sparx, Asia’s biggest hedge fund, will jointly manage Cosmo, according to the statement.
Lotte plans to keep Seoul-based Cosmo’s current management and turn it into an asset management firm to enter South Korea’s pension fund market, the statement said. Sparx’s managing director Masatoshi Fukami said he is aiming to complete the deal by the end of August.
“We decided to team up with South Korea’s Lotte Group as it aims to branch into the mutual fund business,” Fukami, 46, said in a Bloomberg Television interview.
Fukami, while declining to specify the price Sparx is seeking, said that “generally speaking” a fair valuation of Cosmo might be 10 percent of the firm’s assets under management. Cosmo’s assets totaled 326 billion yen ($3.1 billion) as of May 31, according to Sparx.
The Korea Economic Daily reported on Feb. 20 Lotte may buy a 52 percent stake in Cosmo for as much as 400 billion won ($388 million), citing people it didn’t identify.
Tokyo-based Sparx currently owns 68 percent of Cosmo and the remaining 32 percent is owned by Cosmo employees, Lotte said.
-------Sevenfold growth
Cosmo’s pre-tax profit was 46.7 billion won in 2007, Lotte said. The investment company’s assets under management have grown more than sevenfold since Sparx invested in it three years ago, as Cosmo began offering alternative investment products using the hedge fund's expertise, said Masamichi Kudo, Sparx’s head of finance.
Sparx reported group net income last month of 3.2 billion yen for the 12 months ended March 31, 15 percent less than a year earlier, as fee income from its investment trust business declined. It was ranked by Alpha magazine as Asia’s largest hedge fund manager by March 2007 assets.
Lotte, South Korea’s fifth-largest family-run industrial group, bought Daehan Fire & Marine Insurance Co., which changed its name to Lotte Non-life Insurance Co., earlier this year.
Sparx has declined 17 percent this year on the Jasdaq stock exchange, compared with a 5 percent drop in Japan's benchmark Topix index.