Lotte chief likely to push for Hotel Lotte IPO to win power struggle

Lotte Group Chairman Shin Dong-bin is likely to accelerate the initial public offering of its subsidiary Hotel Lotte to consolidate his grip on the multinational group’s South Korean entities amid a resurfacing proxy battle with his elder brother Shin Dong-joo, analysts said Monday.

This comes as he immediately needs to increase the value of Lotte Corp., a Seoul-based holding firm of Korean-Japanese retail giant. The Hotel Lotte IPO will not only water down its Japanese control but also ###allow the holding firm to secure cash to buy more shares of other subsidiaries.###

Hotel Lotte is now over 99 percent owned by Japanese investors, while it controls over 11 percent of Lotte Corp.

The plausible scenario is to weaken the subsidiary’s ties with Lotte Holdings, a Japanese holding firm, and other Japanese shareholders, spin-off parts of it and merge the remaining part with Lotte Corp., said Choi Nam-kon, an analyst at Yuanta Securities Korea.

“Repeating power struggles in Lotte Group is likely to bring forward the Hotel Lotte IPO plan and reform its corporate governance,” Choi wrote in a note.

In April, Chairman his elder brother rekindled the family feud by proposing at a shareholders meeting to him from the board of Lotte Holdings, marking his sixth such attempt.

Along with the Hotel Lotte IPO plan, the incumbent conglomerate chief could also adopt shareholder-friendly policies, carry out an e-commerce strategy and securitize its real estate assets in order to cement his power over Lotte Corp., he added.

Countering the IPO speculation, on the other hand, is a gloomy outlook of Hotel Lotte as its duty-free shop business -- a main source of revenue -- is battered by plummeting demand due to the coronavirus outbreak. Hotel Lotte has yet to file for a listing eligibility review at the Korea Exchange.

“The COVID-19 pandemic is weighing on Hotel Lotte’s performance and investor sentiment in the IPO market, which makes little case for the Hotel Lotte listing this year,” noted KB Securities analyst Jeong Dong-ik.

By Son Ji-hyoung (consnow@heraldcorp.com)