Chairman Shin Dong-bin solidifies control of group
By Yoon Ja-young
Lotte Group has launched a holding company, Lotte Corp. , solidifying the leadership of Chairman Shin Dong-bin over the conglomerate.
"The launch of the holding company is a move to keep our promise of innovation," said Lotte Group's innovation office chief Hwang Kag-gyu, who will be co-heading the holding company with Shin. "It will be a new starting point for Lotte."
He said Lotte Corp. will enhance corporate and shareholder value through transparent management.
The country's fifth-largest conglomerate was founded in 1948 as a confectionery company in postwar Japan by the chairman's father, Shin Kyuk-ho. He nurtured it into business empires in Korea and Japan, running retail, food and amusement businesses.
The founder's two sons, Lotte Group Chairman Shin Dong-bin and his elder brother Shin Dong-joo, however, feuded over group management control. The holding company is the chairman's final step to solidify his control.
The group split each of its four affiliates, Lotte Shopping, Lotte Confectionery, Lotte Chilsung Beverage and Lotte Food, into investment and business entities to set up the holding company. The investment bodies established the holding firm.
Chairman Shin has a 13 percent stake in the holding company, while Shin Dong-joo has only 0.3 percent and Japan's Lotte Holdings 4.5 percent.
Lotte Corp. has 6.36 trillion won in assets and 4.89 trillion won in capital. It has 42 affiliates but the figure increases to 138 when overseas subsidiaries are included. The holding company is scheduled to increase the number of Korean affiliates to 70 by purchasing stakes and through mergers.
With about 170 employees, the holding company will manage its stakes in other affiliates, enhancing their corporate value and managing brands. In the mid-to-long term, the holding company will be searching for new business possibilities as well as finding M&A opportunities. Its main source of income will be dividends and brand royalties it collects from the affiliates, which will be around 0.15 percent of total sales.
The holding company system also lessens circular shareholdings in the group. The company said it will get rid of all circular shareholdings by next April. This is expected to enhance transparency in management as well as efficiency.
There also remains the issue of Hotel Lotte, which had served as the de facto holding firm of the conglomerate. It delayed listing its shares on the stock market last year. Lotte Corp. is expected to seek a merger with Hotel Lotte in the long term.
"Since the value of Hotel Lotte is unknown, the merger process would start only after Hotel Lotte is listed," said Lee Bong-chul, an executive in charge of financial innovation at the group. "It is expected to take considerable time due to THAAD."
Lotte Group has fallen victim to China's economic retaliation against Korean firms following the deployment of the U.S. anti-missile system - the Terminal High Altitude Area Defense (THAAD) - here to protect against increasing North Korean threats. China says the system is a threat to its security.
Lotte, which has retail businesses in China and runs duty free stores in Korea that Chinese tourists visit most, became the target of Beijing's retaliation after providing its golf course for the installation of the anti-missile battery.
By Yoon Ja-young
Lotte Group has launched a holding company, Lotte Corp. , solidifying the leadership of Chairman Shin Dong-bin over the conglomerate.
"The launch of the holding company is a move to keep our promise of innovation," said Lotte Group's innovation office chief Hwang Kag-gyu, who will be co-heading the holding company with Shin. "It will be a new starting point for Lotte."
He said Lotte Corp. will enhance corporate and shareholder value through transparent management.
The country's fifth-largest conglomerate was founded in 1948 as a confectionery company in postwar Japan by the chairman's father, Shin Kyuk-ho. He nurtured it into business empires in Korea and Japan, running retail, food and amusement businesses.
The founder's two sons, Lotte Group Chairman Shin Dong-bin and his elder brother Shin Dong-joo, however, feuded over group management control. The holding company is the chairman's final step to solidify his control.
The group split each of its four affiliates, Lotte Shopping, Lotte Confectionery, Lotte Chilsung Beverage and Lotte Food, into investment and business entities to set up the holding company. The investment bodies established the holding firm.
Chairman Shin has a 13 percent stake in the holding company, while Shin Dong-joo has only 0.3 percent and Japan's Lotte Holdings 4.5 percent.
Lotte Corp. has 6.36 trillion won in assets and 4.89 trillion won in capital. It has 42 affiliates but the figure increases to 138 when overseas subsidiaries are included. The holding company is scheduled to increase the number of Korean affiliates to 70 by purchasing stakes and through mergers.
With about 170 employees, the holding company will manage its stakes in other affiliates, enhancing their corporate value and managing brands. In the mid-to-long term, the holding company will be searching for new business possibilities as well as finding M&A opportunities. Its main source of income will be dividends and brand royalties it collects from the affiliates, which will be around 0.15 percent of total sales.
The holding company system also lessens circular shareholdings in the group. The company said it will get rid of all circular shareholdings by next April. This is expected to enhance transparency in management as well as efficiency.
There also remains the issue of Hotel Lotte, which had served as the de facto holding firm of the conglomerate. It delayed listing its shares on the stock market last year. Lotte Corp. is expected to seek a merger with Hotel Lotte in the long term.
"Since the value of Hotel Lotte is unknown, the merger process would start only after Hotel Lotte is listed," said Lee Bong-chul, an executive in charge of financial innovation at the group. "It is expected to take considerable time due to THAAD."
Lotte Group has fallen victim to China's economic retaliation against Korean firms following the deployment of the U.S. anti-missile system - the Terminal High Altitude Area Defense (THAAD) - here to protect against increasing North Korean threats. China says the system is a threat to its security.
Lotte, which has retail businesses in China and runs duty free stores in Korea that Chinese tourists visit most, became the target of Beijing's retaliation after providing its golf course for the installation of the anti-missile battery.
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