Lotte restructures to enhance transparency and corporate governance; IPO on long-term agenda

SOUTH KOREA. Lotte Group is reorganising its operations into a holding company structure as the Korean chaebol (conglomerate) seeks to create greater transparency and enhanced corporate governance. The move may finally clear the way for the much-delayed IPO of Hotel Lotte (which embraces Lotte Duty Free) to happen, though not for some considerable time.

The restructure, outlined in a Lotte Group document provided to The Moodie Davitt Report, honours a pledge made by Chairman Shin Dong-bin last year. The group plans to divide each of its four main companies – Lotte Confectionery, Lotte Shopping, Lotte Chilsung Beverage and Lotte Food – into respective investment and business divisions. It will merge each investment division with Lotte Confectionery, the ‘mother’ of the group, into a holding company structure.

Lotte Confectionery and the other four companies will decide whether to approve the merger at a shareholders’ meeting on 29 August. If they get the green light, the merger after the divestiture will take effect on 1 October.

According to Korean analysts, Shin will secure 20-30% of the planned holding firm after Lotte completes its final piece of the shake-up – the IPO of Hotel Lotte, which has been becalmed for months amid a mire of scandals and controversies.

The restructure will “enhance management transparency, improve shareholder-oriented management culture, and strengthen professional and responsible management”, Lotte said.

“The responsible management system for each division and each affiliate can be further strengthened,” it added. “Each division is expected to enhance the competitiveness of its core businesses by boosting the expertise of its divisions and increase organisational efficiency through the establishment of decision-making systems appropriate to the characteristics of each management division.”

Korean reports suggest the Hotel Lotte IPO is likely to take place in late 2018 or 2019.