A Step Toward Governance Reform
Lotte Group has recently started the process of transforming its governance structure. The first step was taken by Lotte Rental. On May 31, the company submitted an application for a preliminary review of its listing on the Korea Exchange. The company is expected to have an initial public offering of its stocks as early as September if it receives approval on its plan in August.
Lotte Group established Lotte Corp., a holding company, in 2017. However, Lotte Corp. is still sharing major shareholder roles with Hotel Lotte, which controls major affiliates including Lotte Engineering & Construction (43.07 percent), Lotte Property and Development (32.83 percent) and Lotte Shopping (8.86 percent).
Lotte Corp.’s major shareholders are Lotte Group chairman Shin Dong-bin (13.0 percent) and group affiliates (28.7 percent). On the other hand, Hotel Lotte is 99 percent owned by companies in Japan, including Lotte Holdings (19.07 percent) and other companies in special ties with the group. As a result, Lotte Group is still considered to be a Japanese business group. To overhaul its governance structure, Lotte Group needs to have an IPO of Hotel Lotte.
Lotte Group originally prepared to list Hotel Lotte in 2015. However, the listing plan was foiled due to a dispute between chairman Shin Dong-bin and his brother Shin Dong-ju in 2015 and a massive slush fund investigation by the government in the following year. Lotte Group seemed to promote an IPO of Lotte Hotel again in 2020, but the outbreak of COVID-19 shattered this plan.
Industry insiders regard Lotte Rental’s IPO as a stepping stone for the listing of Hotel Lotte. The IPO will help raise the corporate value of Hotel Lotte, which is the largest shareholder of Lotte Rental. Lotte Rental recorded positive results last year thanks to a surge in demand for rental cars. Hotel Lotte additionally acquired a 5.02 percent stake in Lotte Rental in May.