Hotel Lotte scales back its IPO ambitions

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Hotel Lotte scales back its IPO ambitions

Hotel Lotte was supposed to be listed in one of the largest initial public offerings (IPO) in recent years, but that move has been delayed and scaled down amid an ongoing investigation of the unit’s executive over bribery allegations.

The company filed a revised securities report on Tuesday saying that its IPO will be pushed back to July 15 from June 29.

In the wake of the scandal, Hotel Lotte also revised the scale and the price range per share.

The company initially aimed to raise as much as 5.7 trillion won ($4.9 billion), but it adjusted that target to 5.3 trillion won.

While Hotel Lotte refrained from reducing the number of shares on sale, it cut the price range per share to between 85,000 won and 110,000 won, down from between 97,000 won and 120,000 won, according to an electronic disclosure filed late Tuesday.

The unit also cited the latest investigation in a revised securities report.

Market watchers say the change in schedule reflects concerns that the bribery scandal would reduce investors’ appetite.

The move came as the prosecution investigates an allegation that Shin Young-ja, a sitting board member of Hotel Lotte and a member of the founding family, received some 1.5 billion won from Jung Woon-ho, CEO of the cosmetics company Nature Republic.

The money was allegedly given in return for putting Nature Republic shops in Lotte Duty Free shops in Seoul. Hotel Lotte runs Lotte Duty Free, which accounts for over 90 percent of the hotel unit’s corporate value estimated at 12.9 trillion won.

If the executive pleads guilty, it will deal a huge blow to Hotel Lotte’s efforts to win a new license to operate a duty-free shop after losing its right to operate a store at the Lotte World Tower in Jamsil, southern Seoul.

The scandal has put different IPO-related events on hold.

The hotel operator planned to give presentations to analysts, fund managers and potential investors abroad on June 6, but that road show was canceled.

The IPO was proceeding smoothly before news of the bribery allegations broke. Chairman Shin Dong-bin of Lotte Group attended a meeting with investment officers from asset management companies on May 30 in the run-up to the listing.

The briefing, held at the Lotte Hotel in Sogong-dong, central Seoul, was designed to generate interest in the IPO among potential investors. Chairman Shin Dong-bin rarely appears at such meetings.

The unit submitted a securities report, required for an IPO, to the Financial Services Commission in May to meet the timeline for the listing.

The company had said most of the proceeds will be invested to strengthen its footing in the global market.

Despite the lingering uncertainties, a representative at Hotel Lotte denied reports that the unit could suspend the market debut.

“The reports are groundless,” the representative said. “We are making it later for different reasons.”

Hotel Lotte is the de facto holding company of Korea’s retail giant, as it owns the largest stake in most of its major affiliates, including Lotte Shopping, of which it owns 8.83 percent.


BY PARK EUN-JEE [park.eunjee@joongang.co.kr]




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