BUSINESS

Lotte likely to unveil governance shakeup plan next week: sources

By KH디지털2
  • Published : Apr 21, 2017 - 11:07
  • Updated : Apr 21, 2017 - 11:07

South Korean retail conglomerate Lotte Group is likely to unveil a series of steps next week to simplify its complicated governance structure, which may include split-ups or mergers of key affiliates, industry sources said Friday.

The group's two key affiliates -- Lotte Shopping Co. and Lotte Confectionery Co. -- are rumored to be rolling out the plan at their respective shareholders meeting next week to split themselves into an investment unit and a business arm, according to industry sources familiar with the matter. 

Lotte Chairman Shin Dong-bin lights the lamp on the "New Lotte" signage at the 50th anniversary ceremony of the group's foundation in Jamsil, east of Seoul, on April 3, 2017 (Yonhap)

The next possible step will likely be merging the two investment units of Lotte Shopping and Lotte Confectionery, in which Hotel Lotte Co., the unlisted de facto holding company of the group, currently owns an 8.83 percent and 3.24 percent stake in each.

The plan, if it goes smoothly, will pave the way for the retail giant to realign its complex web of cross-shareholding structure that has 94 affiliates under its wing to a simpler one with the hotel unit at the top of the group's governance structure, they said.

The country's fifth-largest firm pledged to revamp its governance structure after the controlling Shin family was embroiled in an array of troubles, which have tainted the corporate image built over half a century and hindered the group's key business plans.

While Lotte Chairman Shin Dong-bin was caught up in a leadership battle with his estranged brother, his whole family, including founder Shin Kyuk-ho, is facing ongoing trials on charges of corruption and tax evasion.

The reform measure, should it take place, will be evidence of Lotte's determination to make a fresh start as its retail business in China is suffering a major blow from forced shutdowns of most of its hypermarket stores, after offering a land lot to the Korean government to station a US anti-missile system.

Another key part of Lotte's reshuffle includes the planned initial public offering of Hotel Lotte, the hidden jewel of the conglomerate controlled by Japanese investors. The IPO has been delayed amid business jitters.

Founded in 1967, Lotte grew into one of South Korea's top conglomerates, or chaebol, driven by its success in the retail, food and amusement businesses. Its sprawling empire now includes chemical, duty-free, finance and construction, with a global workforce of 125,000. As of end-2016, Lotte's revenue stood at 92 trillion won ($80.7 billion). (Yonhap)