Shareholders of Lotte’s 4 units approve plan over holding firm

SEOUL-- Shareholders of South Korean retail giant Lotte's four affiliates gave the green light for setting up a holding firm Tuesday, paving the way for its chairman to tighten his grip on the country's fifth-largest business group.

Shareholders of the four sister firms -- Lotte Shopping Co., Lotte Confectionery Co., Lotte Chilsung Beverage Co. and Lotte Food Co. -- gave the nod to the proposal to split each into an investment entity and a business one, and merge the investment bodies to set up a holding firm.

Following Tuesday's votes, the new holding firm will set sail in early October.

Trading of the four affiliates will be suspended soon and resumed at the end of October. The new holding firm will be traded at the stock market around the same time.

The new holding company is expected to seek to merge with unlisted Hotel Lotte Co., the current de facto holding firm of the business group, in the long-term, giving Lotte Group Chairman Shin Dong-bin a controlling stake that will solidify his leadership of the family-controlled conglomerate, industry watchers say.

The group has been pushing for an initial public offering (IPO) of Hotel Lotte, but the plan has been held back due to unfavorable market conditions.

Lotte says that under the proposed scheme, the group's cross-shareholding among affiliates will be reduced, thus making its governance structure more transparent and efficient.

A group of individual shareholders, meanwhile, voiced objections to the plan, saying the move is aimed at passing on business risks of Lotte Shopping to the three other affiliates.

"Minority shareholders will have to take the burden in the process of setting up the holding firm," said Lee Seong-ho, head of an individual shareholders' group, vowing to take legal action following the votes.

Lotte said it will increase the dividend payout ratio, or the percentage of earnings paid to shareholders, to 30 percent from the current average of 12 to 13 percent.

The push to set up a holding firm came as Lotte is facing a series of troubles from home and abroad.

The controlling Shin family, including the chairman and his father and group founder Shin Kyun-ho, are facing trials on a string of corporate crime allegations. The incumbent chairman has been separately indicted on charges of bribery in relation to a political scandal that led to the ouster of former President Park Geun-hye.

On the business front, Lotte is suffering a heavy blow from its outlet business in China, as most of its Lotte Mart stores have been forced to shut down on Beijing's orders, in an apparent retaliation for giving land to the Korean government that is being used to set up a U.S. anti-missile system.

Founded in 1967, Lotte grew into one of South Korea's top conglomerates, or chaebol, driven by its success in the retail, food and amusement businesses. Its sprawling empire now includes chemical, duty-free, finance and construction, with a global workforce of 125,000. As of end-2016, Lotte's revenue stood at 92 trillion won (US$80.7 billion).

Source: Yonhap News Agency

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