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Lotte begins new governance under holding company

RETAIL giant Lotte officially launched its new holding company on Sunday, changing its governance system to strengthen chairman Shin Dong-bin’s control of the group and simplify its web of complex cross-holdings.

The plan to create Lotte Corporation, the holding company, was announced in April by the group and approved by shareholders in late August. 
Touted as a part of Shin’s moves to increase management transparency at the group, the holding company merged the investment entities of four Lotte affiliates — Lotte Confectionery, Lotte Shopping, Lotte Chilsung Beverage and Lotte Food.
According to a disclosure filed on Saturday, the holding company will be headed up by co-presidents Shin Dong-bin and Hwang Gak-kyu, the head of Lotte’s management innovation office. The full board will be confirmed at the first board meeting, expected to come in mid-October directly after the Chuseok holiday. “This [holding] company will be tasked with business management evaluation and support and brand license management to increase Lotte’s company value,” the group said in a statement. 
Trading on the four affiliates will resume on October 30. The value of the holding company is estimated to be between 4 trillion won (Bt116 billion) and 5 trillion won by market analysts such as OJ Nam of Samsung Securities.
Originally, Lotte Group had announced that the holding company would reduce circular holdings within the conglomerate from 67 to 18. However, that number fell to 13 once Lotte Engineering and Construction sold its 300,000 shares in Lotte Shopping in a block deal on September 14. 
Reducing cross-shareholdings through Lotte Corp strengthens Shin’s hold on the group. 
Industry analysts put Shin’s stake in Lotte Corp at just above 10 per cent, with that number expected to rise as affiliates continue to sell and buy shares to reduce cross-holdings. With a firm grip on the holding company, Shin is expected to be better able to steer the group through direct management.

Published : October 01, 2017