April 20, 2024

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[THE INVESTOR] China’s retaliation against Lotte Group over providing a site for THAAD deployment has cast a cloud over its listing plans in South Korea. 

The Chinese authorities have already banned imports of its products and halted the business of its hypermarkets in the country. They have also disallowed travel packages to South Korea, delivering a heavy blow to its duty-free business, the largest in South Korea, that depends over 70 percent of its revenue on Chinese tourists. Reservations for Lotte’s hotels too have been canceled and there is a growing movement against purchasing its products in mainland China.

The stock prices of the group’s major affiliates, Lotte Shopping, Lotte Food, Lotte Chilsung and Lotte Confectionery in particular, dropped sharply last week.

Lotte has been seeking to list its core company Hotel Lotte, as part of it effort to reorganize the governance structure. Last year the attempt was stalled by the slush fund and embezzlement scandals of the founding family, and it renewed its push for an IPO when Chairman Shin Dong-bin dodged legal actions in September.

Another major obstacle lies in the possibility of another investigation related to lobbying for a license for downtown duty-free store operations. 

Samsung Electronics Vice Chairman Lee Jae-yong has been arrested on bribery charges, and the special prosecutors are expanding their focus on other conglomerates. Shin has already been banned from leaving the country.

Although Lotte keeps saying that it will resume its listing plans, it is realistic to say that only after the existing problems have a closure that the Korea Exchange or Financial Supervisory Service could give it the go-ahead, according to market watchers. 

By Hwang You-mee (glamazon@heraldcorp.com)