Lotte moves six affiliates to holding company

Home > Business > Industry

print dictionary print

Lotte moves six affiliates to holding company

Lotte Group shareholders approved a plan to shift six affiliates to the group’s holding company structure in its first shareholder meeting since Chairman Shin Dong-bin was detained on bribery charges.

Stakeholders in the group’s holding company Lotte Corporation voted to approve the split of six affiliates - Lotte GRS (formerly Lotteria), Fujifilm Korea, Lotte Logistics, Lotte International, Daehong Communications and Lotte IT Tech - into six separate operating units and holding units. The six holding units will then be merged into Lotte Corporation.

The move is the last step in removing Lotte’s cross-shareholding structure - a pledge Shin made in 2015.

There were a total of 416 cross-shareholding cases in 2014, the largest number found among Korea’s top 10 conglomerates. Now that the cross-shareholding has been removed, Lotte expects the move to help the holding company strengthen control over its affiliates, further stabilizing the structure it has been aiming for. This will also increase the number of Lotte Corporation’s affiliates to 53, which accounts for half of all 92 affiliates.

The approved plan also strengthens Shin’s grip over Lotte Corporation as he and Lotte’s Korean affiliates own a 60.9 percent share in the holding company. The share was 54.3 percent before the move.

The group said the restructuring process regarding the six subsidiaries will be completed by April 1.

“Lotte will continue to push through additional efforts for organizational restructuring in order to elevate the holding company’s value,” the company said in a statement.

There was speculation before the meeting that Lotte’s Japanese affiliates may not approve of the plan that strengthens the detained Shin’s influence over Lotte Corporation. In Japan, convicted corporate heads are frequently encouraged to step down.

Shin voluntarily resigned the day after he was detained, fueling concerns that his estranged older brother Shin Dong-joo, who lost a bitter succession battle in 2015, will leverage the situation to attempt a comeback.

However, Japan’s Lotte Holdings expressed approval of the plan, according to Hwang Gak-gyu, Chairman of Lotte Corporation, at the shareholders meeting.

Tuesday’s event was an important one for Hwang as he will be leading the group while Shin is detained. Shin has been managing Lotte’s move to a holding company structure, working with the group’s Korean and Japanese executives. Shin is said to have been supported by both sides because of his business acumen and status as a member of the owner-family.

With Shin behind bars, Lotte still has to manage a difficult relationship with its Japanese units to fully achieve its holding company goals. Hotel Lotte, which owns a significant number of shares in Lotte Chemical and Lotte Construction, is largely owned by Lotte’s Japanese units.

Shin’s plan was to reduce Lotte’s Japanese units’ 99 percent share of Hotel Lotte, but he had to stop in 2016 when he was investigated on bribery charges. With Shin behind bars, communication between the units is likely to be put on hold until his release.


BY SONG KYOUNG-SON [song.kyoungson@joongang.co.kr]
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
s
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)