Lotte may go public without brother’s approval

Industry

Published: 02 Dec. 2015, 21:14

Lotte may go public without brother’s approval

The Lotte Group is expected to go public without having to seek the approval of the rivaling older brother Shin Dong-joo, the former vice chairman of Lotte Holdings and current chairman of SDJ Corporation.

The Korea Exchange (KRX) on Wednesday announced that it is loosening regulations that limit the sale of stocks owned by the largest stakeholder and affiliated investors - in this case, Shin Dong-joo - for six months after the company goes public. The goal is to secure management stability and protect investors.

Under the current law, Lotte Group Chairman and Shin Dong-joo’s younger brother Shin Dong-bin could have had trouble converting Hotel Lotte, the holding company of the retail conglomerate, into a publicly traded company if Shin Dong-joo disagreed with the sales limit regulation. Shin Dong-joo is currently the largest stakeholder of Kojyunsya, which owns 5.45 percent of Hotel Lotte.

Only affiliated investors who have special relations with the company, or the majority stakeholder whose stake is less than 5 percent, were exempt from the sales limit if they met certain criteria.

However, the KRX has relaxed that regulation by allowing those with more than 5 percent to be exempt if an investors’ whereabouts is unclear or investors in conflict with the majority stakeholder do not impose a threat to the company’s management and the protection of investors. This will allow Hotel Lotte to go forward with its public offering without the approval of Shin Dong-joo.

KRX, the stock market operator, said it has decided to relax the regulation to promote more companies to go public as some companies, including Lotte, have had trouble due to conflicts with some shareholders.

“Until now the process of public offering has been exceptionally difficult compared to other overseas stock markets and in some cases the companies have had trouble because of several shareholders who have no influence on management stability,” said a KRX official.

Instead of relaxing the regulation, KRX decided to tighten its evaluation on companies that are hoping to go public, which includes detail recording of the company’s debt ratio as well as plans on its corporate social responsibility.

Lotte Group Chairman Shin Dong-bin took over the retail giant after an attempted coup by his older brother and their father and Lotte founder Shin Kyuk-ho. Since July he has repeatedly promised to improve corporate governance and transparency of the company.

This includes reorganizing its cross-sharing among Lotte affiliates, which is in its final stage, and the public offering of its holding company Hotel Lotte that will launch next year.

BY PARK JIN-SEOK, KIM JEE-HEE [kim.jeehee@joongang.co.kr]