UPDATE : 2018.11.19 MON 18:09
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Lotte's new holding firm sets sail after merger

South Korean retail giant Lotte's new holding company officially set sail Sunday, as the business group faces a series of challenges from home and abroad.

In August, shareholders of four Lotte affiliates -- Lotte Shopping Co., Lotte Confectionery Co., Lotte Chilsung Beverage Co. and Lotte Food Co. -- gave the nod to the proposal to split each into an investment entity and a business unit, with the investment bodies to set up a new holding company.

Lotte Group Chairman Shin Dong-bin and Hwang Kag-gyu, head of the group's corporate innovation office, are known to be the co-representatives of the new company.

The holding firm will be listed on the local stock market at the end of this month, along with the relisting of the four affiliates whose shares have been suspended from trading since Thursday.

The new company will sign consulting contracts with each of the conglomerate's affiliates and play the role of evaluating their businesses and managing brand licenses, according to Lotte officials.

This file photo taken on May 10, 2017, shows Lotte Group Chairman Shin Dong-bin arriving at a Seoul court to stand trial on corporate crime allegations. (Yonhap)

Lotte says the group's cross-shareholding among affiliates will be reduced with the establishment of the new holding firm, thus making its governance structure more transparent and efficient.

Yet, the launch of the new company is widely seen as a step for the group chief to tighten his grip on the country's fifth-largest family-run conglomerate, or chaebol.

The new holding company is expected to seek to merge with unlisted Hotel Lotte Co., which served as the de facto holding firm of the business group, in the long term, giving Shin a controlling stake that will solidify his overall leadership of Lotte, industry watchers say.

The group's push for an initial public offering (IPO) of Hotel Lotte has been held back due to unfavorable market conditions.

Lotte recently decided to withdraw its discount store business from the Chinese market, after about 80 percent of the 112 Lotte Mart stores in the neighboring country have been closed for more than six months following Beijing's apparent retaliation over Seoul's deployment of a U.S. anti-missile system. Lotte signed a land-swap deal with the Seoul government to host the Terminal High Altitude Area Defense (THAAD) system.

This photo taken Aug. 29, 2017, shows the 123-story Lotte World Tower in eastern Seoul. (Yonhap)

Despite repeated assurances from Seoul and Washington that the THAAD system is designed only to defend against North Korea, China has long voiced opposition to the deployment, arguing that it poses a threat to its own security interests.

Separately, the Shin family, including the chairman and his father and group founder Shin Kyuk-ho, are facing trials on a string of corporate crime allegations. The incumbent chairman has also been indicted on charges of bribery in relation to a political scandal that led to the ouster of former President Park Geun-hye.

Founded in 1967, Lotte grew into one of South Korea's leading chaebols, 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 (US$80.7 billion). (Yonhap)

Kim Su-a  edt@koreapost.com

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