Lotte scion gets chance to inspire Korea Inc

Lotte Chilsung Beverage Co

22/01/2020 02:41

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Sharon Lam
    HONG KONG, Jan 22 (Reuters Breakingviews) - The passing of
Lotte’s patriarch sets the stage for a turnaround. Battered
shares in the listed units of the South Korean
retail-to-chemical conglomerate rallied on Monday after Shin
Kyuk-ho died at 98. That may reflect investors' hopes that his
younger son, group chairman Shin Dong-bin, will accelerate a
restructuring. A respite from political, legal and family spats
gives him room to manoeuvre, and less excuse for delay. 
    The tycoon, who died on Sunday, launched what became Lotte
in 1948 as a chewing gum manufacturer in Japan. It went on to
become South Korea’s fifth-largest chaebol. In recent years,
however, the group fell victim to diplomatic bad luck and
self-inflicted mistakes. In 2017, its Chinese business was
eviscerated by Beijing over Seoul’s deployment of a U.S.
anti-missile system. A 2019 squabble between Seoul and Tokyo led
to a boycott of Lotte’s products, given its corporate presence
in Japan. There was an ugly succession struggle between Shin
Dong-bin and his older brother - now largely settled - and he
was also briefly jailed in a political bribery scandal. The
Lotte Corp  004990.KS  holding entity has lost 50% of its market
value in three years, per Refinitiv data; the nine listed Lotte
units trade at two-thirds of book value on average.
    Technically little changes strategically with the founder’s
passing. His son is already chairman of the group and chief
executive of Lotte Corp, the $3.4 billion holding company which
sits atop the conglomerate’s South Korean businesses. Yet shares
in the latter popped as much as 20% on Monday before falling
back, while those of its Lotte Shopping  023530.KS  rose 5%. The
younger Shin has pledged to shut down unprofitable businesses
and has unwound circular shareholdings. But the need for funds
to pay his substantial inheritance tax gives him a personal
motive to go faster.
    Reviving a long-delayed listing of Hotel Lotte, which the
company in 2016 hoped would raise nearly $5 billion, would pave
the way for a massive restructuring. Mooted plans to then merge
the newly listed hotel unit - which holds key stakes in
affiliates - with Lotte Corp could create a larger holding
company with a cleaner ownership structure. Successful execution
might even inspire larger peers, including Hyundai and SK Group,
suffering under similar conglomerate discounts, to follow.
    On Twitter https://twitter.com/sharonlamhk
    
    CONTEXT NEWS
    - South Korea’s Lotte Group founder Shin Kyuk-ho died on
Jan. 19, at the age of 98. He was the last of the South Korean
entrepreneurs who founded the country’s major chaebols, or
family-run conglomerates. 
    - For previous columns by the author, Reuters customers can
click on  LAM/ 
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Founder of S.Korean retail giant Lotte dies     urn:newsml:reuters.com:*:nL4N24926H
BREAKINGVIEWS- New winds may blow Korean Air successor
off-course     urn:newsml:reuters.com:*:nL3N22I0NL
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 (Editing by Pete Sweeney, Robyn Mak and Katrina Hamlin)
 ((sharon.lam@thomsonreuters.com; Reuters Messaging:
sharon.lam.thomsonreuters.com@reuters.net))