Start for Holding Company
It is expected that the Lotte Group’s adoption of a holding company structure will be accelerated as former Lotte Holdings Japan vice chairman Shin Dong-joo disposed of his shares in Lotte Shopping.
According to industry sources, the former vice chairman disposed of his 1,730,883 Lotte Shopping shares, equivalent to 5.5% of the total, in an after-hours block deal on February 15 at a price per share of 226,060 won, 11% lower than its closing price. In doing so, he secured approximately 390 billion won. Experts point out that this cash is likely to be spent for the purchase of shares of Lotte Confectionery or Lotte Aluminium, which are in a cross-shareholding relationship with Lotte Shopping. According to some of them, Lotte Group chairman Shin Dong-bin outdoes him in terms of shareholding even in that case.
Some other experts are predicting that the former vice chairman will focus more on Lotte Japan by increasing his shares in Lotte subsidiaries in Japan such as L Investment Company and Kojunsha, which governs Hotel Lotte as the top of the governance structure of Lotte Korea. Still, the former vice chairman already has a high shareholding ratio in Kojunsha and Lotte Holdings Japan is an employee ownership company with a lot of shareholders in favor of chairman Shin Dong-bin, which means share purchase by the former vice chairman will not be that easy.
Those in the business community are mentioning that the Lotte Group’s adoption of a holding company structure will pick up speed after the disposal of the shares in that the decrease in the shares of the former vice chairman, who is negative about the adoption of the structure, means an increase in the influence of chairman Shin Dong-bin. It is expected that Lotte’s conversion to a holding company will be initiated by Lotte Shopping, Lotte Confectionery, Lotte Food and Lotte Chilsung Beverage, which control most Lotte subsidiaries in South Korea, being split into investment and operating companies and then the investment companies being combined with one another. Then, Hotel Lotte can go public so that the influence of the Lotte subsidiaries in Japan is reduced and then the investment company of Hotel Lotte and those of the distribution and food companies can be merged.
The Lotte Group is planning to appoint new executive members and carry out a reshuffle next week. The group’s subsidiaries are scheduled to be classified into the four business units of distribution, chemical & construction, hotel and food. This move is likely to be the starting point for the conversion.
After the reshuffle, Lotte’s major unlisted subsidiaries in which chairman Shin Dong-bin has a significant influence, such as Lotte Engineering & Construction and Lotte Data Communication Company, are likely to go public, instead of Hotel Lotte immediately going public, so that financial resources required for the conversion can be prepared.