[THE INVESTOR] Lotte Group, Korea’s fifth-largest conglomerate, said on Nov. 27 that it has decided to sell two financial units in a bid to spur the completion of a holding company structure.
The group has been working to transform into a holding company structure, as pledged by Lotte Group Chairman Shin Dong-bin in 2015. He vowed to create a single holding company and simplify the group’s cross-shareholding complexity.
“Since last year, Lotte has been contemplating measures against the rule that prevents a holding company from owning financial affiliates. As a result, we plan to sell Lotte Card and Lotte Insurance,” the company said in a statement.
“We will carefully consider and select the best bidder who can help the companies achieve bigger growth in the era of the fourth industrial revolution.”
“We will seek buyers who can share our strategic directions while protecting executives and other employees,” Lotte Card CEO Kim Chang-kwon said in a statement.
Lotte Insurance and Lotte Card have a staff strength of 3,400.
Lotte Group set up its holding company Lotte Corp. in October last year by merging the investment entities of its four major units -- Lotte Shopping, Lotte Confectionery, Lotte Chilsung Beverage and Lotte Food.
The company is required to sell financial affiliates within two years until October 2019 to comply with the fair trade law which prohibits a holding company from owning a stake in financial firms.
Lotte Corp. owns 93.8 percent in Lotte Card and 25.6 percent in Lotte Capital. It owns no direct stake in Lotte Insurance, but in order to complete the holding company structure, it needs to later merge with Hotel Lotte, the de facto holding company until last year. Hotel Lotte and Shin together hold 53.9 percent stake in Lotte Insurance.
The retail group has a total of 12 financial affiliates including Lotte Capital but the sale of the financial service company has been put off partly because of a high portion of Japanese shareholders and relatively sound financial results. Lotte Capital recorded 69.6 billion won in net profit while Lotte Card’s net profit was down 10 percent to 55.2 billion won on-year in the first half of this year.
The sale of Lotte Card and Lotte Insurance is being managed by Citigroup Global Markets Korea Securities.
The group acquired Dongyang Card in 2002, which became Lotte Card, and Daehan Insurance was renamed as Lotte Insurance after acquisition in 2008.
By Park Ga-young (firstname.lastname@example.org)