Lotte, E-Land face uphill in listing
By Park Hyong-ki
Subsidiaries of Korea’s two retail giants ― Lotte and E-Land ― hit by internal feud, scandal and high debt are looking to go public on the stock market this year to improve their governance and finances, but face some challenges ahead.
Although Hotel Lotte did not specify the timeline for its initial public offering (IPO), this would be its second attempt should it retry listing its shares. The hotel sought to go public last year, but faced hurdles as Lotte owners, including Chairman Shin Dong-bin, were in dispute over management control. Also, Lotte Group had been under investigation for providing funds to sports organizations linked to President Park Geun-hye’s close associate Choi Soon-sil.
Last year, Shin indicated that it would move to improve its governance starting with the hotel’s IPO.
However, industry sources say its listing plan could hit another snag given the negative market outlook. Also, the group has been facing a political debate, with some politicians claiming that funds raised via the IPO would exit the country for Japan as nearly the entire hotel shares are owned by Japan-based Lotte companies.
Japan-based Lotte Holdings and its investment vehicles own a 99.28 percent stake in Hotel Lotte, according to a regulatory filing.
“Gains through the IPO would ignite an exodus of domestic funds to the Japanese companies,” said Rep Kim Jong-min of the Democratic Party of Korea.
Hotel Lotte’s IPO advisors are Mirae Asset Securities, Merrill Lynch and Citigroup. It was estimated that the hotel could be valued as high as 20 trillion won.
E-Land Group, meanwhile, seeks to divest some of its key assets and launch an IPO of E-Land Retail as part of its self-rescue program.
Its aggressive expansion through leveraged buyouts resulted in high debt position, and lowered credit ratings.
E-Land Retail, the operator of resorts, outlets and restaurant chains, has submitted an IPO application for a possible debut on the stock market by the end of the first half of this year, according to the Korea Exchange.
E-Land World, which is the de facto holding company of the group, has a 63.5 percent stake in E-Land Retail. E-Land World’s debt ratio stands at over 300 percent.
“As seen in news, the group is in need of cash to pay down its debt. But the negative stock market outlook could be a setback,” said an industry source.
E-Land World’s current liabilities stood at 4.75 trillion won, well above its current assets of 3.15 trillion won as of the third fiscal quarter of last year, according to its financial statements.