Holding Company
The Lotte Group announced on April 26 that it would conduct equity spin-off in order to divide its four major subsidiaries that hold the majority of shares in its non-listed subsidiaries – Lotte Shopping, Lotte Confectionary, Lotte Chilsung and Lotte Food – into investment and operating companies and then merge the four investment companies to set up one intermediate holding company led by Lotte Confectionary.
The group’s cross-shareholding is expected to be reduced to a significant extent through share exchange and so on as a result of the equity spin-off and merger of the investment companies. Specifically, the number of cross-shareholding links in the group is estimated to be reduced from 67 to 18. Lotte Group Chairman Shin Dong-bin is planning to sell his shares in the operating companies and increase his shares in the investment companies during the course so as to have a greater control of the group. His shares in the intermediate holding company are predicted to increase to 20% to 30% in the end.
The four subsidiaries are planning to make their final decisions on the issue at shareholders’ meetings scheduled for August 29 after receiving objections on August 14 to 28. Once the approval is given, the process is initiated on October 1 and trading of shares of the companies is resumed on October 30 after change listing and relisting examinations.
The group still has to deal with some issues in order to adopt the holding company structure though. For example, it has to incorporate Hotel Lotte, which is another one of its major subsidiaries, and subsidiaries in which Hotel Lotte has high shareholding ratios into the holding company structure. Earlier, the group was planning to tackle this matter by listing of Hotel Lotte. However, the listing is unlikely to be possible within this year and, as such, the holding company structure is unlikely to be completed for the time being.