Lotte's holding company completes spadework for group realignment

24, Sep. 2019

SEOUL, AJU – The holding company of Lotte, a South Korean conglomerate founded by a Korean-born businessman in Japan, completed the spadework for the realignment of group structure to enhance governance as required by financial regulators.

In October 2017, Lotte Group chairman Shin Dong-bin launched Lotte Corp. and secured firm group-wide control. The realignment of the group's structure would be completed after the holding company absorbed more affiliates and reduced its stake in three financial units -- Lotte Capital, Lotte Card and Lotte Insurance -- by October this year to meet legal requirements.

Lotte Corp. said Monday that its board decided to sell a 25.64 percent stake in Lotte Capital to a Lotte financial unit based in Japan for 333.2 billion won ($279.3 million) in a deal to meet a fair trade law which prohibits holding companies from owning financial affiliates. Separately, the board of Lotte Engineering & Construction agreed to sell an 11.81 percent stake in Lotte Capital for 153.5 billion won.

In May, Lotte Corp. sealed a deal to sell a 79.83 percent stake in Lotte Card, a credit card unit, to a consortium involving Woori Bank and MBK Partners, a private equity fund, for 1.38 trillion won. As a result, Lotte Corp.'s equity ratio in Lotte Card would be cut down to 13.95 percent. Lotte Corp. also agreed to sell a 53.49 percent stake in Lotte Insurance to JKL Partners, a private equity fund, for 373 billion won.

Lotte's realignment was delayed in February last year when a district court in Seoul sentenced Chairman Shin to two years and six months in prison on charges of bribing Choi Soon-sil, the crony of South Korea's ousted ex-president Park Geun-hye. The chairman was released in October last year after an appeals court suspended his sentence.

After a turbulent period in 2018, Lotte stepped up its presence mainly in Southeast Asia to make up for its failure in China that forced a strategic change in the group's overall business, reflecting the chairman's new initiative.