Hotel Lotte to List Early as May in Largest Recent Korea IPO

  • Lotte filed unit's IPO as part of move to improve governance
  • IPO gives momentum for more Lotte units to list, exchange says

Hotel Lotte Co., the lodgings and duty-free sales unit of conglomerate Lotte Group, could go public as soon as May, the Korea Stock Exchange said after approving its listing application, setting the stage for potentially the largest South Korean public offering since 2010.

The impending IPO could give impetus for Lotte Group to list its other units, according to the exchange in an e-mailed statement. Lotte Chairman Shin Dong Bin, caught in a power struggle with his elder brother for control, promised in September to improve corporate governance in the group started by his father in Japan in 1948.

“We expect the current Hotel Lotte IPO to give momentum to other Lotte Group affiliates including Lotte Data Communication Co., Korea Seven Co., and Lotteria Co. to list their shares,” the Korea Stock Exchange said. Hotel Lotte is expected to draft detailed IPO plans after finalizing its 2015 results at its March annual shareholders meeting, the exchange said.

The exchange did not provide details on the IPO including size and the price range, or whether the other Lotte Group units have applied for listing. Lotte Data Communication is an information technology consulting service provider, Korea Seven operates convenience stores, while Lotteria runs a chain of fast-food restaurants.

Public Dissent

“The biggest reason behind the IPOs is to ease public dissent on Lotte and its complicated structure post the feud between Chairman Shin and his elder brother,” said Park Ju Gun, president of corporate watchdog CEOSCORE in Seoul. Lotte is also seeking external funding under the chairman “as he sets out to solidify his position as the new owner of the group.”

Lotte will work with its IPO arrangers to progress the Hotel Lotte listing “steadily as planned,” the group said in a statement Thursday. The lead managers for the public offering are Daewoo Securities Co., Bank of America Merrill Lynch and Citi, the company said last September.

The South Korea listing could help reduce Hotel Lotte stakes held by the group’s Japanese affiliates, a complicated relationship that has led to the group being lambasted by Korean politicians. Hotel Lotte, which reported revenue of 4.7 trillion won in 2014, is the group’s fourth largest unit by sales, according to the government’s Fair Trade Commission.

Malaysian Unit

Hotel Lotte submitted its application in December, without providing financial terms. Yonhap News reported Jan. 24 that Hotel Lotte could raise about 4 trillion won ($3.3 billion), while IFR reported Jan. 13 the IPO would rake in between $3 billion to $5 billion.

The last time a Korean initial public offering exceeded $2 billion was in 2010, when Samsung Life Insurance Co. raised $4.3 billion, according to data compiled by Bloomberg.

A separate unit, plastics manufacturer Lotte Chemical Corp., is also exploring an IPO of its Malaysian petrochemicals arm Lotte Chemical Titan Holding Sdn. that could raise more than $500 million, people with knowledge of the matter said earlier this month.

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