[Yonhap News Photo]
South Korea's fifth largest family-run conglomerate, Lotte Group, announced the indefinite postponement Monday of its plan to list its hotel and duty-free operating unit as prosecutors zeroed in on alleged corruption by group executives.
The delay in the initial public offering (IPO) of Hotel Lotte dealt a serious blow to the group's campaign to refresh the group's image tainted by a family feud and attract investments from foreign investors. Hotel Lotte has served as a virtual holding company of the group's units based in South Korea.
Hotel Lotte, the group's flagship unit, has promised to expand its duty-free and other businesses by utilizing its IR conference. But a sudden investigation by state prosecutors forced the group to cancel a series of deal roadshows to be held this month in New York, London, Singapore and Hong Kong. Initial market estimates on Hotel Lotte's IPO ranged from 4.6 trillion (3.8 billion US dollars) to 5.7 trillion won.
The group, which has 89 subsidiaries with more than 100 trillion won in assets. is now in a chaotic state, with its control tower in limbo as top executives were summoned by prosecutors one after another for questioning. Shares of group subsidiaries have nosedived.
Prosecutors delved into a flow of secret funds collected by group chairman Shin Dong-bin, previous irregular deals and possible links with
politicians and government officials after they launched a groupwide raid to seize documents, computer hard drives and accounting books.
Public concern and resentment have grown over the group's protracted fraternal feud with its ailing founder, Shin Kyuk-ho, 94, in his dotage without making a clear decision on his successor. The founder's younger son, Shin Dong-bin, now holds the support of South Korean and Japanese shareholders, but his elder brother, Shin Dong-joo, has refused to give up his bid for managerial control of the retail and hotel giant.
The feud began in late 2014 when Dong-bin seized control of Lotte Holdings, the group's Tokyo-based holding company, in a bid to succeed his father.
In July last year, the ailing father fired his younger son, but Dong-bin fought back by sacking his father, insisting his father cannot name an heir because he has been mentally incompetent with age. Since then, the two sons have continued to challenge each other's claims to the empire.
Aju News Lim Chang-won = cwlim34@ajunews.com
reporter
Park Sae-jin
swatchsjp@ajunews.com
