Lotte announces start of holding company

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Lotte announces start of holding company

Lotte launched its new holding company on Sunday, as the retail giant continues to face a series of challenges in Korea and abroad.

In August, shareholders of four affiliates - Lotte Shopping, Lotte Confectionery, Lotte Chilsung Beverage and Lotte Food - approved a proposal to split each into an operating unit and holding unit, with the holding units merging into a holding company.

Lotte Group Chairman Shin Dong-bin and Hwang Kag-gyu, head of the group’s corporate innovation office, will lead the new company. It will be listed on the local stock market at the end of this month, along with the four affiliates whose shares have been suspended from trading since Thursday.

The new company will sign consulting contracts with each of the conglomerate’s affiliates and play the role of evaluating their businesses and managing brand licenses, according to Lotte officials.

Lotte says the group’s cross-shareholding among affiliates will be reduced with the establishment of the new holding company, thus making its governance structure more transparent and efficient. But the launch has also been widely seen as a step for the group chief to tighten his grip on the country’s fifth-largest conglomerate.

The new holding company is expected to seek a merger with unlisted Hotel Lotte, which served as the de facto holding unit of the business group, giving Shin a controlling stake that would solidify his overall leadership of Lotte, industry observers say.

The group’s push for an initial public offering of Hotel Lotte has been held back due to unfavorable market conditions. Lotte recently decided to withdraw its discount retail business from the Chinese market after about 80 percent of its Lotte Mart stores there were closed for more than six months, the effect of Beijing’s apparent retaliation over Seoul’s deployment of a U.S. antimissile system. Yonhap
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