The Lotte Group’s governance structure reform is expected to pick up some speed with a stay of execution granted to Chairman Shin Dong-bin on December 22. The group launched Lotte Holdings as its holding company in October this year, but has yet to complete the process. Since the establishment of the holding company, a total of 42 subsidiaries have been incorporated into the holding company unlike the group’s chemical and tourism companies such as Hotel Lotte.
The final step of the process is Hotel Lotte’s IPO. Hotel Lotte is functioning as the group’s intermediate holding company and Japanese such as Lotte Holdings Japan currently have 99% of the company. If it is to be incorporated into the holding company without listing, all the Japanese shares have to be bought, and this is quite burdensome on the part of Lotte and, as such, listing is considered to be inevitable. Lotte can blur its image as a Japanese company by means of Hotel Lotte listing, too. Once listed, approximately 40% of the company is estimated to be owned by general South Korean shareholders.
The chairman recently said that he is going to carry out the process in 2019. If so, subsidiary incorporation is initiated next year and the listing of Hotel Lotte is expected to be realized in 2019. “The listing procedure is likely to be accelerated once China’s THAAD retaliation subsides,” a high-ranking Lotte executive mentioned on December 24.
In the meantime, Lotte has reduced the number of its cross-shareholding relations from 50 to 11. The remaining 11 also have to be eliminated by April 12 next year according to the Fair Trade Act. This is completed once 7.3% of Lotte Holdings shares are disposed of by Fuji Film Korea, Lotte Data Communication Company and Daehong Communications, which currently own 3.84%, 2.35% and 1.11% of Lotte Holdings, respectively.