Lotte Chairman's Brother Mounts Bid to Capture Korea Arm

  • Shin Dong Joo wants to control Lotte in both Korea and Japan
  • He says Japan's Lotte could be worth $9.7 billion in IPO

The Japan-based older brother of Lotte Group Chairman Shin Dong Bin wants to install himself and their father at the top of the family business’s lucrative South Korean units, in the latest salvo of a yearlong battle for control over the retail conglomerate.

Shin Dong Joo on Friday proposed a plan to form a new board of directors for Japan-based Lotte Holdings Co. that includes himself as chief executive officer and the father Shin Kyuk Ho as founder, and for them to also sit at the top of the South Korean business. He also plans to redistribute shares in a key employee association that holds a size-able stake in the group.

“I, as Lotte’s next top leader, will lead both the Japan and Korea groups,” Shin Dong Joo, who managed Lotte’s businesses in Japan before he was stripped of executive positions last January, said at a media briefing held in Tokyo. He tried to oust his younger brother Shin Dong Bin last July, only to see that plan backfire and their father, who started the business in Japan in 1948, sidelined.

At another press briefing last week, Shin Dong Joo called for Japan-based Lotte Holdings Co. to hold an extraordinary general meeting to put him on the board and oust current directors, and for it to pursue an initial public offering to enhance transparency at the group. That company could be valued at 1.1 trillion yen ($9.7 billion) or 250,000 yen per share, according to a presentation material distributed by Shin Dong Joo on Friday.

Legal Means

Shin Dong Joo’s proposals don’t seem achievable, said Han Bo Young, a spokeswoman at Lotte Group in Seoul. Lotte Group has said Shin Dong Joo should convene a general meeting via legal means, and that past meetings had resulted in shareholders endorsing the current management.

Though Lotte has operations in Japan, the group generates the bulk of its business in Korea, where it has more than 80 affiliates in areas ranging from department stores to amusements parks and hotels with over 100 trillion won ($81 billion) of assets. Lotte Holdings is a particularly important unit because of its stakes in key affiliates and its role in coordinating group strategy.

Shin Dong Joo criticized the current management for excessive investments into areas outside its core businesses, citing a money-losing Chinese operation as an example. “I won’t pursue unnecessary expansion to make the company bigger, and won’t make investments into something that doesn’t have synergy with our main businesses,” he said.

While the chairman controls Lotte Holdings, the company counts closely held Kwang Yoon Sa as its biggest shareholder with a 28 percent stake. Shin Dong Joo says he owns 50 percent of Kwang Yoon Sa, and that the move to list Lotte Holdings wouldn’t affect the planned Korean IPO of one of the group’s largest companies, Hotel Lotte Co.

Redistribute Shares

Shin Dong Joo also unveiled a plan to redistribute shares of Lotte Holdings, currently held by an employee stock ownership committee, to other staff in Japan. He estimates that the committee owns 27.8 percent of Lotte Holdings’ outstanding shares, making it the second-biggest shareholder after Kwang Yoon Sa’s 28.1 percent.

Those shares will be distributed to more than 4,000 employees at Japan Lotte, including current members of the employee stock ownership committee, senior managers, as well as regular employees, and the plan is so “a wider range of workers can benefit from the company’s growth in the light of the IPO,” Shin Dong Joo said.

“The IPO is my first mission as the successor. No matter what hardships I have, I have to achieve it,” Shin Dong Joo said. He will hold a meeting with the employee stock ownership committee to brief them on his plan, he said, declining to specify the date.