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April 27, 2017

Lotte announces company revamp

South Korea’s Lotte is to create a new united investment wing, under a major restructuring of the group.

South Korea’s Lotte is to create a new united investment wing, under a major restructuring of the group.

The overhaul sees retailer Lotte Confectionery, Lotte Food, Lotte Chilsung Beverage and Lotte Shopping will each split into two companies.

The united investment division will assume control of the investment business of each subsidiary, which are one of the two new companies to be created. The investment division will formally be owned by Lotte’s confectionery wing.

With the group’s investment activities united under one division, the four companies will concentrate on operational activities.

Explaining the move, Lotte said: “The shareholder-centered management culture will be strengthened, and the company value and shares value, which have been underestimated because of the opaque governance structure, are expected to get re-evaluated.

“By separating business risks from investment-related risks, it is possible to secure the stability of management and prevent the parent company from suffering a collapse due to the deterioration of the subsidiary’s management.”

The move follows claims Lotte has used complexity within its corporate structure to avoid transparency. This has intensified because of revelations about Lotte’s controlling Shin family’s involvement in the influence-peddling scandal that led to the ousting of President Park Geun-hye.

Earlier this month, Park and Lotte chairman Shin Dong-bin were charged with bribery. The charges of bribery relate to $6.2m of alleged payments made to Choi Soon-sil, the friend of Park.

Lotte said last week it found the decision to charge Shin “regrettable”, according to Reuters.

Shin is on a separate graft trial involving family members charged with embezzlement and breach of trust, Reuters reported last week.

The company has also come under commercial pressure through China’s closure of Lotte Mart stores in China in retaliation for Lotte providing land to the US military for the THAAD anti-missile system, which China considers a security threat.

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