[SUPER RICH] Shin Dong-bin strives to shine through expansion

Lotte Group chairman Shin Dong-bin splurged 8.1 trillion won ($8 billion) on business ventures in February.

On Feb. 11, Shin reportedly orchestrated Lotte Duty Free store’s lucrative bid to operate inside Incheon International Airport for 6 billion won over the next five years, and on Feb. 26 a consortium of Lotte Shopping and Lotte Hotel was named the preferred bidder of rent-a-car company KT Rental after offering 1.1 trillion won. On Feb. 27, Lotte DFS was selected to run an urban duty-free store on Jejudo Island in exchange for 1 trillion won.

There are more acquisitions to come. According to reports, Lotte DFS is determined to acquire Italy-based duty-free store chain WDF for 3 trillion won. Lotte Shopping is reportedly eyeing Atrium, a shopping mall complex in Moscow, where Lotte already runs a department store and a five-star hotel in the city center.

Moreover, Lotte Group is alleged to be the most likely candidate to take over Kumho Industrial, the operator of Asiana Airlines. Shin himself met Kumho Asiana Group chairman Park Sam-koo in late February and rumor has it that they reached some level of understanding about the takeover war surrounding the country’s second-largest carrier.

“It seems like Shin is determined to buy everything attractive in the market,” a business insider said. 

Timing of investments

At a time when everyone is talking about an economic meltdown, Shin’s rather aggressive moves could be perceived as risky. But in fact, Shin has always been venturesome.

Since taking over Lotte operations as a general director in 2004, Shin has been deeply involved in 35 mergers and acquisitions. And 22 of these were conducted from 2008 to 2012, during the global financial crisis.

From Belgian confectionary-maker Guylian to Korea’s home appliance retailor Hi-Mart, some of the market’s most lucrative names became a part of Lotte’s business empire during the period.

Under Shin’s de-facto reign, the number of Lotte affiliates ― in Asia, Europe and even the U.S. ― soared from 36 to 74, with sales jumping from 23 trillion won to 83 trillion won. And the group has become the fifth-largest business conglomerate by assets.

“Shin always stresses that when the market is strained, good things are available for a bargain,” a group insider said.

“And right now, when everyone thinks the economy cannot get any worse, Shin is seeing an investment opportunity. Because Shin started his career at Nomura Securities in the 1980s, he understands macroeconomics and knows how to make the most of his experience. When he has his eye on something, he is willing to pay anything to get it,” he added.

In fact, Shin announced in February that Lotte, a business empire with estimated assets of 91.7 trillion won, would invest 7.5 trillion won this year in the retail, heavy industries and construction, food, tourism, and service sectors. This is a record high for Lotte, up 34 percent from the previous year’s goal. 


Waiting to be anointed

Many assume that behind Shin Dong-bin’s aggressive expansion lies the zeal to cement his status as Lotte’s crown prince.

While his father and Lotte founder Shin Kyuk-ho firmly holds the reins of the company ― Shin Kyuk-ho is still reportedly directly giving orders to the CEOs, and has yet to talk about how he would divide up the 10 percent he has in the company, including a 6.83 percent share in Lotte Confectionary, the main axis of the business group’s governance ― Dong-bin needs to prove that he deserves the succession, observers say.

And he seems very close.

Just a year ago, Shin Dong-bin was apparently second in line. Dong-bin’s elder brother and Lotte Holdings in Japan vice chairman Shin Dong-joo was perceived as the successor because Lotte Holdings holds the lion’s share in Lotte Hotel, which serves as the de facto holding company of Lotte Group here.

But in January, Dong-joo was suddenly ousted from his managerial positions in the Japanese units for undisclosed reasons. Shin Dong-bin has allegedly taken over the Japanese businesses.

“Shin Dong-bin is a minute away from being anointed. This is the chance for him to shine,” a market watcher said.

The rather media-shy chairman suddenly showed up in front of the press in January and flaunted his vision. “There have been rumors that because Dong-bin isn’t fluent in Korean ― he was born in Japan ― he avoided the media limelight, but during his encounter with the press he was confident and outspoken,” an onlooker said. 


Things to solve

But Shin also has things to clean up before paving his way to the top.

The first is to maximize the profit of the existing businesses.

The operating profit of Lotte Hi-Mart dropped by 19.3 percent in 2014, falling for the fourth year in a row. The 6 trillion won in rent for Incheon airport’s duty-free zone is considered excessive, far higher than market analysts’ estimated generated sales of 5 trillion won. The acquisition of KT Rental, for which Lotte paid about 200 billion won-300 billion won more than the other bidders, also raised eyebrows.

But most of all, doubts over the safety of the 123 story-Lotte World still loom.

The municipal government decided to suspend the operations of the building’s aquarium and cinema over safety concerns. Water leakages from the aquarium were detected and “intolerable vibrations” were reported in theaters. The construction of the concert hall was halted in December after a worker died there.

Other accidents including compartments and a metal door falling from ceilings, cracks in the walls and floors, and sinkholes under roads nearby have elevated public anxiety over safety. The shopping mall, which was supposed to be the highlight of Shin Kyuk-ho’s regime, saw a 30-40 percent fall in the number of visitors since October’s partial opening and about 16 percent of the workers there were let go.

Lotte recently decided to give tenant stores rent exemptions of about 10 billion won. Shin Dong-bin said he would visit the site every week to guarantee safety. The company is also planning various promotions to draw more people.

“But will Lotte be able to shed the image of the past and move forward? Shin Dong-bin will need (to put in) a lot of hard work for that,” an analyst said.

By Bae Ji-sook (baejisook@heraldcorp.com)