SOUTH KOREA. Hotel Lotte, parent company of Lotte Duty Free, announced today that it is withdrawing its much-anticipated Initial Public Offering (IPO) as a result of ongoing bribery allegations against the company.
As reported, Government investigators are studying claims that Shin Young-ja, a Hotel Lotte board member and part of the founding family (but who has nothing to do with Lotte Duty Free management), received KW1.5 billion (US$1.3 million) from Nature Republic CEO Jeong Un-ho to list the latter’s brands in Lotte Duty Free shops.
Lotte announced on 7 June that it had delayed the IPO until next month and revalued it as a result of the scandal.
Lotte Duty Free sources pointed out to The Moodie Davitt Report that the investigation has nothing to do with the travel retailer’s management. The company chooses its brand partners through “fair and clear process”, it said.
The original listing, one of the biggest in Korean history, was initially due to take place around 29-30 June, before the delay to late July. But further raids last week on Lotte’s corporate offices and intense adverse publicity in Korean and international media and within the global investor community have forced Lotte to pull the plug on the IPO for an indefinite period.
Lotte said in a regulatory filing today [in Korean and sighted by The Moodie Davitt Report] that it had withdrawn the IPO to protect investors “relevant to recent internal and external issues”.
Some observers believe the group scandal could seriously affect Lotte Duty Free’s chances of regaining its duty free licence for Lotte World Tower, lost in the controversial bid last November. The government recently announced that it will award four new downtown licences and Lotte was very optimistic it would secure one of them for its Lotte World Tower store which is due to stop trading on a duty free basis at the end of June.
“This will have a very big impact on our industry,” a veteran Korean duty free executive told The Moodie Davitt Report. “This raid to the group HQ is shaking the whole nation.”
One informed observer pointed out to The Moodie Davitt Report that Lotte Group is now the official target for a public prosecution, potentially the biggest in decades.
Local media KDF News noted: “Lotte Group faces the biggest crisis since its foundation in 1967.”
