Lotte family feud heats up

Hatsuko Shigemitsu, the second wife of Lotte Group founder Shin Kyuk-ho, gets into a vehicle at Gimpo International Airport in western Seoul, Thursday. The mother of Shin Dong-joo and Shin Dong-bin, who has mostly stayed in Japan, is said to be the only person who can mediate between her two sons. / Yonhap

Shareholders' meeting to determine successor

By Lee Hyo-sik

A war of succession between the two sons of Lotte Group founder Shin Kyuk-ho is intensifying because of a vote showdown which will take place at a shareholders' meeting of Lotte Holdings, the holding company of the Lotte Group in Japan.

Shin Dong-bin, Kyuk-ho's second eldest son, who appears to have consolidated control of the 90 trillion won business empire by fending off a recent coup attempt by his elder brother Shin Dong-joo, is said to be in a better position to win managerial control of the holding firm.

He holds the titles of Lotte Holdings CEO and Lotte Group chairman in Korea.

Lotte Group said Dong-bin has already secured more than a 50 percent stake in Lotte Holdings, adding that he will win full control of the Lotte Group both in Korea and Japan when shareholders meet.

On the other hand, Dong-joo, who was fired as vice chairman of Lotte Holdings in January, is insisting that nearly two-thirds of Lotte Holdings stakeholders will support him at the gathering.

He said his ailing father will endorse him over his younger brother as the heir of Lotte Group.

Hatsuko Shigemitsu, the mother of the two Shin brothers, came to Korea Wednesday afternoon, raising the possibility that members of the Lotte family will soon hold a gathering concerning the ongoing sibling feud. Kyuk-ho's second wife, who has mostly stayed in Japan, is said to be the only person who can mediate between her two sons.

It is crucial for both to control Lotte Holdings because it has a 19.1 percent stake in Lotte Hotel, the de facto holding company of the Lotte Group in Korea. Lotte Hotel holds an 8.8 percent share in Lotte Shopping and has a considerable stake in other key units.

An unlisted packaging company founded by Kyuk-ho holds a 27.65 percent stake in the holding firm, while Dong-joo and Dong-bin have 19.1 percent each.

Company employees hold about 12 percent but it is unknown who holds the remaining stakes because the company does not publically disclose the list of its stake owners.

The two Shin brothers also hold a 29 percent stake each in the Japanese packaging firm while their father has about 3 percent.

A senior executive at Lotte Group said Thursday that the group chairman has already secured more than half of Lotte Holdings stake, adding that he could garner as much as 70 percent when company shareholders meet.

It is not yet decided when the meeting will take place, but Lotte Group said Lotte Holdings shareholders will soon gather to change company ordinances to appoint Kyuk-ho as honorary chairman.

At that time, the two Shin brothers will likely face-off over managerial control of the holding firm.

"Company employees, the board of directors who hold considerable stakes in the company and other individual shareholders have all pledged to support Dong-bin. Under any circumstances, Dong-joo won't be able to receive more than 50 percent," said an executive who declined to be named.

The board of directors at Lotte Holdings consists of seven members, including Kyuk-ho and Dong-bin. The other five directors have sided with Dong-bin as they agreed to strip the founder of his board seat and chairmanship on Tuesday after the senior Shin supported Dong-joo's failed coup.

Dong-bin is currently staying in Japan to meet with company shareholders, asking them to support him at the planned shareholders' meeting.

Dong-joo vows to fight back

Dong-joo, who returned to Korea late Wednesday night, unveiled two documents that he said were signed by Kyuk-ho.

Citing the papers, he said the group founder ordered the dismissal of Dong-bin and other Lotte Holdings directors from their posts.

"The documents show that the founder wanted me to be appointed again as Lotte Holdings CEO," Dong-joo said in an interview with KBS, Thursday. "My father is healthy and didn't lose his judgment. He is capable of making sound decisions."

Dong-joo said Kyuk-ho ordered him to accompany him on his trip to Japan, Monday.
"Visiting Lotte Holdings headquarters was the founder's idea, not mine. He wanted to go there because Dong-bin and other directors did not follow his order to step down. That is why my father wanted to go to Japan and I simply accompanied him out of concern for his well-being," he said.

Dong-joo also said he has secured a two-thirds stake in Lotte Holdings, vowing to replace current members of the board of directors who support his younger brother.

"I will push to replace all board members at the upcoming shareholders' meeting," Dong-joo was quoted as saying by a Japanese newspaper on Thursday. "The group founder and company employees will back me up at the meeting. If I combine their stakes with my 19.1 percent, the amount of shares will amount to nearly two-thirds."

He then said that when the meeting convenes, he will replace all the current board members. "My father also wants to expel Dong-bin and other board members from Lotte Holdings."

Dong-joo returned to the country before his younger brother to meet his ailing father, who is reportedly staying at the Lotte Hotel in downtown Seoul.

He is widely expected to persuade the senior Shin and other family members to support him in the escalating sibling infighting for the control of the retail-focused conglomerate.

The senior Shin founded Lotte in Japan in 1948 as a snack maker. Over the years, the group expanded into the manufacturing and services sectors.

The group entered Korea in 1967 and has grown into the country's fifth-largest conglomerate, operating units in retail, hotel and petrochemical industries.

The group as a whole posted sales of about 90 trillion won in 2014, and aims to boost that to 200 trillion won by 2018.

Lotte Korea reported more than 84 trillion won in sales, while its sister company in Japan had less than 6 trillion won. In contrast to Lotte Group's rapid growth in Korea, its Japanese operations have largely stagnated.