Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
Lotte to dispose of financial units
By Nam Hyun-woo
Lotte Group Chairman Shin Dong-bin
By Nam Hyun-woo
Lotte Group has decided to dispose of financial services units in order to complete its transformation into a holding company structure, Korea's fifth-largest conglomerate said Tuesday.
Lotte Corp. said it will sell Lotte Card and Lotte Insurance in order to meet Korea's fair trade regulations.
The Fair Trade Act stipulates a non-financial holding firm to unload its stakes in financial companies within two years of the holding firm's establishment. As Lotte Group adopted the holding firm structure last year, it became the subject of the regulation and has to sell its financial units, including the two and Lotte Capital, a lending firm.
“Since we adopted the holding firm structure last year, we have been making efforts to comply with regulations and improve our governing structure,” the company said in the statement.
“After reviewing rules on separating commerce and finance, we decided to sell Lotte Card and Lotte Insurance to outside buyers among our financial units. Further details will be revealed after discussions with sales manager Citigroup Global Markets Korea Securities.”
Though not included in the announcement, the group has to sell its stakes in Lotte Capital by October next year. Reportedly, the group is postponing Lotte Capital's sellout in order to maximize its value, as the company's earnings have been showing an uptrend in recent years.
Lotte Corp. has 93.8 percent stake in Lotte Card and 38.1 percent in Lotte Capital, but has no stake in Lotte Insurance. Instead, Hotel Lotte has a 23.68 percent stake in it. It is interpreted that the group decided to sell the Hotel Lotte's stake because the group has to put the hotel giant under the control of Lotte Corp. in the future.
The group did not reveal information about buyers, but analysts name Woori Bank and Shinhan Financial Group as a potential buyer of Lotte Insurance.
Woori Bank will embrace a holding firm structure as early as next year and is looking to expand its portfolio. Shinhan Financial has no non-life insurer under its wing.
For Lotte Card, Woori Bank and online-only banks are on the lips of analysts, but they say odds are not that high because the government's hardline policies against credit card firms are feared to deteriorate firms' earnings.
“For those firms to make further advances, we will carefully select buyers,” the group said. “Above all, we will find buyers who share the same strategic direction as Lotte and protect Lotte employees.”
The announcement came as Lotte Group Chairman Shin Dong-bin's latest move to expedite the group's governance restructuring. Soon after he returned to the group's management last month, Lotte Corp has put Lotte Chemical under its control by acquiring a 23 percent stake.
With the announcement, expectation is high that the group will soon begin the initial public offering of Hotel Lotte, which is mandatory for completing the holding firm structure and becoming independent from Lotte Japan.
Hotel Lotte was a de-facto controlling firm of Lotte Group before Lotte Corp.'s establishment, because it had and still has majority of major Lotte companies' stakes.
Lotte Holdings, Lotte Japan's holding firm, and its investment companies have 97.2 percent stake in Hotel Lotte.
By listing Hotel Lotte, the group can dilute Japanese stakes in it, allowing the group to put Hotel Lotte under Lotte Corp. more easily.