Lotte power shift claims eldest son

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Lotte power shift claims eldest son

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A major power shift has taken place at Lotte Group, as the founder’s eldest son has been elbowed out of the family business while the second son is expected to succeed their 93-year-old father.

On Friday, 61-year-old Shin Dong-joo, vice chairman of Lotte Holdings in Japan and eldest son of Lotte Group founder and Chairman Shin Kyuk-ho, was ousted.

The de facto holding company of Lotte Group, Lotte Holdings, in Japan on Friday announced that the junior Shin was dismissed as a board member. The decision was made during a shareholders’ meeting on Thursday. This was the latest title that Dong-joo has been stripped of at Lotte Japan since last month.

On Dec. 26, Dong-joo also lost his title at three other affiliates of Lotte Group. He was the vice chairman and CEO of Lotte International, which is the flagship of Lotte’s operation in Japan, vice chairman of Lotte Co., a confectionery affiliate in Japan, and had an executive post at Lotte Ice Cream.

Despite speculation as to the reasons behind the dismissal of Dong-joo, Lotte has not given a straight answer.

Dong-joo’s younger brother and the Korean Lotte Group Chairman Shin Dong-bin have kept quiet about the recent changes. The only comment from 60-year-old Dong-bin was that the decision had already been made by their father. He added that he wasn’t sure whether he will participate in the management of the Japanese Lotte Group.

Shin Kyuk-ho, who is Korean-Japanese, founded the retail and confectionery giant Lotte Group in Tokyo in 1948. It was in 1967 that Lotte Group entered Korea.

It was the general understanding that to prevent sibling rivalry common in the process of succession in major conglomerates, Lotte Group in Japan will be headed by the older son, Dong-joo, while younger brother Dong-bin will be in charge of Lotte in Korea.

However, there have been signals that the older brother, who unlike his younger brother has kept a low profile in Japan, started to take a more aggressive stance since the summer of 2013.

Dong-joo up until August has been increasing his stake in the Korean affiliate Lotte Confectionery through roughly 12 purchases. Dong-joo’s share increased from 3.48 percent to 3.92 percent. In response, Dong-bin also raised his stake to 5.34 percent.

Lotte Confectionery is one of two companies that play a significant role in controlling Lotte Group in Korea. The other is Lotte Hotel, which is entirely owned by Lotte Holdings in Japan.

Lotte Confectionery is the de facto holding company of Lotte Group’s food and beverage affiliates as it owns the controlling stakes of Lotte Chilsung Beverage as well as the fast food chain Lotteria.

Although Lotte Group in Korea has been thriving with a revenue exceeding 83 trillion won ($75 billion) as of 2013 to Lotte Japan’s 5.7 trillion won, Dong-bin’s position within the conglomerate will be threatened as Lotte Holdings in Japan owns 19 percent of Lotte Hotel.

Additional control of Lotte Confectionery could equate to solidifying influence over Korean Lotte Group.

The largest stakeholder of Lotte Holdings is affiliate Kojyunsya Co., which was founded in 1967. It has a 27.6 percent stake in the holding company. According to Lotte Japan’s website, the company specializes in packaging. But in reality it is a paper company with only three employees. If the stake of Kojyunsya is passed on to the little brother, Dong-joo will have little chance of succeeding.

It is rumored that the decision by Dong-joo to raise his stake in the confectionery angered the father.

“It’s hard to think of other reasons other than that Dong-joo either had a serious problem with his health or the father [Kyuk-ho] was angered by the sneaky stake purchases that Dong-joo made on the Korean business,” said an insider of the Japanese business community.


BY Kim Hyun-ki, Shim Jae-woo and Lee Ho-jeong [ojlee82@joongang.co.kr]

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