The prosecution decided to indict Lotte Group chairman Shin Dong-bin and not to indict SK Group chairman Chey Tae-won with regard to bribery allegations against former President Park Geun-hye. These contrasting decisions are leading to contrasting responses from the two groups. The SK Group is expected to be able to accelerate its business in global markets such as China and Japan once its chairman’s overseas travel ban is lifted in about four months. On the contrary, the Lotte Group is likely to face a gap for the time being with its chairman involved in a series of lawsuits.
On April 17, the SK Group welcomed the news that the special investigation headquarters of the Seoul Central District Prosecutors' Office decided not to indict its chairman. “It is very fortunate that he has been cleared of suspicions,” it said, continuing, “We will keep trying to contribute to the national economy by pursuing change and innovation.”
As mentioned above, overseas business activities of the SK Group are likely to be sped up, after a hiatus of four months, with the chairman paying closer attention than before. He was forbidden from leaving South Korea in mid-December last year by the team of special prosecutors led by Park Young-soo. His latest overseas business trip was to the Middle East in late November last year, when he met with the CEOs of partner companies such as SABIC.
Industry experts are predicting that he will fly to China or Japan soon. He issued his China Insider declaration in 2006 for rebuilding of the group and it has concentrated more and more on China since then. However, the travel ban has hindered its projects in China such as butanediol production with Sinopec, acquisition of shares from Shanghai Secco and electric vehicle battery cell manufacturing plant construction. At the same time, the chairman himself is expected to lead SK Hynix in attempting to take over Toshiba's memory business. At present, not only SK Hynix but also Hon Hai Precision Industry and Western Digital are bidding for the business estimated to be priced at 20 trillion won or more. Chairman Chey Tae-won has established close rapport with politicians and entrepreneurs in the countries the companies are headquartered in, that is, Taiwan and the United States, and it can play an important role in the upcoming processes.
“The chairman declared Deep Change as the group’s business goal for this year and its projects in China and Japan are indispensable for it,” said an industry insider, adding, “He is likely to dedicate himself to the group’s global projects from now on.”
Meanwhile, the Lotte Group’s M&A activities and investment decisions have been put on hold since chairman Shin Dong-bin was indicted without detention for bribery. The group has acquired a number of companies and increased its global investment for the past 10 years under his control.
In most cases, indictment without detention results in the lifting of an overseas travel ban. Chairman Shin Dong-bin was indicted without detention for corruption in June last year and his travel ban was lifted for about one month at that time. The ban has recently been put into effect again for his involvement in the Choi Soon-sil scandal.
Still, he is likely to remain grounded in South Korea this time in spite of the recent indictment. This is because he is already involved in three lawsuits regarding an increase in the capital of Lotte PS Net, one of the group’s subsidiaries, salary payment to its owners including former vice chairman Shin Dong-joo, etc. Once another lawsuit begins with regard to his bribery allegations, he should spend most of his time preparing the lawsuits and appearing in court. In fact, he is currently spending two days a week in court for the suits that are underway.
This can be problematic with issues to be dealt with by the chairman piled up in the group. He has remained grounded in South Korea for most of the past year and global business issues of importance have accumulated during the period. Examples of the issues include business restoration in China, where its business activities have been halted due to trade retaliation following the South Korean government’s decision to accept THAAD deployment, listing of Lotte Chemical Titan in Malaysia and petrochemical complex construction in Indonesia, which is estimated to require an investment of at least 4.5 trillion won.
“Indonesian ministers are saying that Lotte Chemical has already decided to make the investment, but Lotte has made no official announcement yet,” said a petrochemical industry source. He went on to say, “An investment of no less than 4.5 trillion won is a matter to be determined by no one but the head of the group himself and the group is currently waiting for his decision.”
The Lotte Group has acquired at least one new subsidiary each year since 2007, when the chairman took part in the management of the group as a whole. However, the group is unlikely to sign any M&A contract this year. Back in 2007, it acquired Woori Home Shopping for 466.7 billion won. Between that year and 2016, it took over 36 companies at home and abroad, such as Daehan Fire Insurance and Guylian in 2007, Doosan Liquor BG in 2009, Buy the Way in 2010, Hi-Mart in 2012, KT Rental in 2015 and Samsung Fine Chemical and the chemical business division of Samsung SDI in 2016. These subsidiaries are leading the growth of the entire Lotte Group these days.
After the acquisition of the two chemical companies from Samsung, chairman Shin Dong-bin joined the bidding for Axiall in the United States last year. However, he had to step out of the bidding in June 2016 due to his travel ban. “Some people might be wondering why decisions cannot be made in the absence of the chairman, who is a single person in the end,” said a local entrepreneur, adding, “Large-scale investments and M&A deals require lots of money to the point of making it impossible for a single subsidiary to make a final decision.”