The mother of all diplomacy.
Lotte Group Chairman Shin Dong-bin and former Lotte Holdings Vice-Chairman Shin Dong-joo met Thursday for the first time in two years amid a nasty brotherly feud over control of Korea's fifth-largest conglomerate, Bloomberg News reported Friday.
What finally brought them together? Like good boys, they decided to listen to their mother. And while they didn't reach an agreement, they conceded the "need to reconcile."
It's a start. Especially if the Shins want to save the malls-to-candy group that generates more revenue than Google Inc. but fell into turmoil after the older brother seized control, ousted their father, and fired his younger brother. The family also faces allegations of embezzlement and is caught up in the nationwide bribery scandal that led to the impeachment of South Korea's former president.
Instead of trying to get along, though, it might be more expedient for the brothers to agree on dividing the Lotte chaebol in two. That way, each gets a piece of the empire their father built, but they don't have to work with one another.
Already, Lotte Group has been spinning off chunks into publicly held companies, including Lotte Shopping Co., Lotte Chemical Corp. and Lotte Confectionery Co. While the conglomerate scrapped a potential $4.5 billion IPO of its hotel unit, carving the empire into pieces has made it easier to split the business.
There are precedents.
A decade ago, the mother of Mukesh and Anil Ambani brokered a peace treaty among her sons, setting India's largest conglomerate on a path to success after her husband died without writing a will.
The pair divided the group in half, handing the refinery, petrochemicals and oil and gas businesses to the older brother and the power and telecom units to the younger. The Ambanis signed a five-year non-compete agreement and parted ways. Shares in the companies soared: Reliance Industries Ltd., the elder brother's flagship, went from around 160 rupees a share in 2005 to an all-time high of 1,649 in 2008.
(The family hasn't been as happy lately. Anil Ambani's business is loaded with debt, the non-compete pact has lapsed, and Mukesh's telecom business is muscling into his brother's turf.)
All's fair in love and non-compete agreements.
The divide-and-conquer strategy worked much better for the German supermarket chain Aldi.
Brothers Karl and Theo Albrecht founded the chain in 1946 after taking over their mother's grocery store, then famously split into separate groups in 1960 in a dispute over whether to sell cigarettes. They drew a line across Germany, creating Aldi Nord and Aldi Sud.
Both Aldis went on to expand internationally, disrupting the global grocery business and making multibillionaires of the brothers before their deaths in 2010 and 2012. The two were smart: They brought professional, non-family managers in early to guard against further family disputes.
Lotte should follow suit. Instead of trying to overthrow his sibling to seize the business, older brother Shin Dong-joo should stand down. For his part, Shin Dong-bin, the current chairman, should carve off a piece of the business for his brother to run. And both should heed the age-old advice: mother knows best.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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