A Lotte Group scion has decided to sell a large portion of his stakes to main affiliates of the South Korean group as an expression of his disapproval to the retail giant’s plan of establishing a holding company.
Representative of Shin Dong-joo, Lotte Group founder’s eldest son and former vice-chairman of the Tokyo-based conglomerate Lotte Holdings said on Tuesday that he will be selling most of his shares to four units, including Lotte Shopping, Lotte Chilsung Beverage, Lotte Food, and Lotte Confectionary.
Shin stated that the offloading was his way of saying his objection towards the group’s decision of setting up a holding business, since he believed that the splits and mergers would not benefit individual shareholders.
He also dismissed the idea that his stake sales mean that he is giving up on trying to obtain management control of the company. The value of the sale was not provided as well.
Lotte has been facing difficulty with restructuring its complicated structure and improving control after a public dispute in 2015 between founding family members, specifically the company’s chief executive Shin Dong-bin and his elder brother Shin Dong-joo.
Shin Dong-joo is currently engaged in legal procedures to take command of Lotte after his younger brother managed to secure control of the group two years ago.
Following Shin’s decision to sell his stakes, shares of the four units were mostly optimistic except for Lotte Shopping which lost as much as 1.7 percent from ₩232,000 to ₩228,000.
Lotte Confectionary was the biggest gainer, adding 1.26 percent to ₩201,000, while Lotte Food was up by 0.1 percent to ₩610,000 and Lotte Chilsung Beverage climbed 0.07 percent to ₩1,501,000.
Lotte’s Restructuring Plan
Back in August, South Korea’s fifth largest conglomerate was given a green light from shareholders to create a holding company, so as to simplify Lotte’s complex ownership structure.
The merged entity is to be formed by dividing and then combining its four units, including Lotte Shopping, Lotte Confectionary, Lotte Chilsung Beverage, and Lotte Food. The new establishment is expected to start operating by October 1.
The retail giant said that the newly-formed structure will be used for business management evaluation as well as providing support and brand license management to boost Lotte’s value.
However, minority shareholders expressed their disapproval on the plan as they worry that the units would be joined in a way that gives Shin Dong-bin complete control over the business.
A minority shareholder said that the main reason of the plan was to strengthen Shin Dong-bin’s control over group, and that they will have to bear the losses from the change.
Lotte found the concerns to be baseless and said that the transition would reorganize its complicated crossholdings, making the ownership makeup more transparent.
Analysts expect Shin Dong-bin to become the largest shareholder since he will be acquiring 10 to 20 percent of shares in the holding company, while the combined shares that he and his parties will be receiving would reach nearly 50 percent.
The restructuring would also boost the stock prices of the individual affiliates once they resumed trading on October 30.