Going to Plan B?
SDJ Corporation announced on September 12 that its chairman Shin Dong-joo, who is the eldest son of the family owning the Lotte Group and a former vice chairman of Lotte Holdings Japan, would sell most of his shares in Lotte Shopping, Lotte Chilsung Beverage, Lotte Food and Lotte Confectionery. This is based on his judgment that division and merger for the establishment of a holding company are not beneficial to individual shareholders. In addition, this means the power struggle in the Lotte Group, which has continued for two years, is about to reach its end.
The former vice chairman explained that his decision is not just share sale but the execution of a put option as the right of a shareholder not consenting to the division and merger of the companies. The Lotte Group’s four subsidiaries held extraordinary shareholders’ meetings on August 29 and the Lotte Group is currently accelerating its conversion to a holding company based on the approval of the division and merger given at the meetings.
At present, the former vice chairman has 7.95% of Lotte Shopping, 3.96% of Lotte Confectionery, 1.96% of Lotte Food, 2.83% of Lotte Chilsung Beverage, 0.37% of Lotte Engineering & Construction, 3.99% of Lotte Data Communication, 4.1% of Korea Seven, 0.53% of Lotte Capital and 0.17% of Lotte Card. He is planning to sell approximately 97% of his shares in each of Lotte Shopping, Lotte Chilsung Beverage, Lotte Food and Lotte Confectionery soon. The sale is equivalent to 764 billion won in total.
According to the former vice chairman, the sale of the shares does not mean giving up his control of the companies. “The share sale has nothing to do with management rights and the former vice chairman will still keep 3% or so for participation in shareholders’ meetings,” SDJ Corporation explained, adding, “The share sale is to express his strong opposition to merger and does not mean he steps aside.”
“It seems that the purpose of this move is to regain his control in Japan by giving up on his shares in South Korea and mending his relationship with Lotte Chairman and his younger brother Shin Dong-bin,” an industry source commented, adding, “In fact, the former vice chairman started the power struggle two years ago in order to regain his control of Lotte Japan, which is the de facto controller of the entire group.”