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Lotte Chairman Expected to Speed up Shift to ‘New Lotte’
Top Court Affirms Suspended Jail Sentence for Shin
Lotte Chairman Expected to Speed up Shift to ‘New Lotte’
  • By Jung Min-hee
  • October 18, 2019, 09:53
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The Supreme Court has upheld a lower court’s ruling that gave a suspended jail sentence to Lotte Group chairman Shin Dong-bin.

Lotte Group officials heaved a sigh of relief on Oct. 17 as its chairman Shin Dong-bin has avoided the worst case scenario of being imprisoned in connection with a graft scandal. The group pledged to reform itself to become a trustworthy enterprise.

On the day, the Supreme Court overruled the High Court and upheld a lower court’s ruling that gave a suspended jail sentence to the Lotte chief.

Lotte Group is likely to speed up a transition to “New Lotte” by finalizing a holding company structure as the legal risk that has dragged on for more than three years since June 2016 is now eliminated, removing operational uncertainty.

Shin Dong-bin is expected to wrap up governance reform to quicken the group’s transition to a holding company structure. After taking over the group’s control from his father Shin Kyuk-ho, Shin Dong-bin launched Lotte Corp., the group’s holding company, in 2017 and has since made strenuous efforts to unwind complex cross-shareholding arrangements among group affiliates. After returning to work in October last year after several months in prison, he pushed ahead to improve the group’s governance. He made Lotte Chemical, the group’s flagship company, a subsidiary of Lotte Corp. and sold off financial units, including Lotte Card Co., Lotte Insurance Co., and Lotte Capital Co., to meet the principle of the separation of banking and commerce.

The ruling of the Supreme Court is expected to encourage Korea’s retail conglomerate to list Hotel Lotte in the stock market, a final step in Lotte Group’s transition to a holding company. As of today, 99 percent of Hotel Lotte stocks are owned by Japan-based Lotte Holdings. The Lotte group should list Hotel Lotte in Korea and consolidate the hotel chain into Lotte Corp. so as to separate itself from Japan-based Lotte Holdings and to become an independent holding company under the charge of Chairman Shin.

Meanwhile, the future of Lotte Duty Free business is up in the air. The hotel’s slowing duty-free sales can shoulder a burden on Hotel Lotte’s initial public offering (IPO). Much attention is also paid to whether the Korean Customs Service (KCS) will strip Lotte Duty Free’s World Tower branch of business license or not.

As Shin Dong-bin was found guilty of bribery, the KCS is probing to decide whether to revoke Lotte Duty Free license. According to customs act article 178.2, the head of a customs office must revoke the license “where the operator of a licensed bonded area has obtained a license by false or other illegal means.” The customs office is highly likely to take the Supreme Court ruling as a legal ground for its decision of revocation.

Lotte Corp. is prospected to make large-scale investments for improvement of its structure as the final decision maker Shin restored his control. The group is expected to quicken its pace to find future business opportunities in retail and chemistry sectors.

Chairman Shin promised to invest 50 trillion won both at home and abroad for the upcoming five years when he returned to work last year. Given that he revealed a 3 trillion won-investment plan for e-commerce startups, it is prospected that the retail giant will gear up massive M&A for e-commerce retailers like Timon and Market Kurly. Besides, Lotte Chemical Co. has spent to build a new petrochemical complex in Indonesia, while Lotte Property & Development Co has recently spent 312.5 billion won to construct a transfer center at Ulsan KTX station.