April 20, 2024

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[THE INVESTOR] Lotte Group, South Korea’s fifth-largest conglomerate, is rekindling merger and acquisition activities to get its business back on track after being hit by a slush fund scandal and power struggle involving the chairman last year.

In its latest move, Lotte Chemical launched a takeover bid for Singapore petrochemical company Jurong Aromatics.

Lotte Group Chairman Shin Dong-bin

On Jan. 20, Lotte Chemical said in a filing with the stock exchange that it had submitted a letter of intent earlier this month on the possible acquisition of JAC and that it was shortlisted on Jan. 10.

The resumption of bold steps for M&A deals comes as the business at the retail-to-chemicals group seeks to normalize after months-long prosecution investigations that were wrapped up in October last year as Chairman Shin Dong-bin and other family members were indicted for embezzlement and breach of fiduciary duties.

Lotte Group is expected to increase its M&A activity with a reduced managing risk in the family-run company, an industry source said.

“The chairman’s aggressive M&A growth strategy was been thwarted by last year’s investigations,” he said.

In fact, the Group gave up its plans to acquire Duty Free Americas amid the widening probe while Lotte Chemicals’ attempt to buy US-based Axiall, now sold to Westlake Chemical, also failed in 2016.

Over the past six years, the group has signed off 20 transactions, including its acquisition of Samsung SDI’s chemical unit for US$2.6 billion in 2015.

Lotte is looking to expand its duty-free business, the company’s biggest revenue source, and M&A targets in the sector.

According to the group, it is considering a bid for a contract with Hong Kong International Airport to operate duty-free shops. The bid will be opened in February.

Hotel Lotte, the group’s de facto holding company, may also seek acquisition targets in a bid to enter markets abroad with funds it will raise via an initial public offering. The hotel unit bought the New York Palace Hotel in Manhattan for US$805 million in 2015.

By Park Han-na (hnpark@heraldcorp.com)