Lotte heirs in ‘mini’ power struggle; Shin Kyuk-ho sent the elder Shin to Japan and the younger Shin to stay in Korea but the Korean ops have grown ten times bigger than the Jap ops in the past decades

2013-09-23 21:00

Lotte heirs in ‘mini’ power struggle

Shin Kyuk-ho                 Shin Dong-joo              Shin Dong-bin
Founder of             Japan Lotte Holdings             Lotte Group
Lotte Group                  vice chairman                     chairman

By Choi Kyong-ae
The brothers who run Lotte operations in Korea and Japan have been on a hunt for stakes in affiliates, triggering suspicion that they are competing for control of the Korean retail giant.  Their father is 91 but still engaged in managing the group. Last week, Japan Lotte Holdings Vice Chairman Shin Dong-joo acquired 1 billion won ($930,000) worth of stocks, representing a 0.05 percent stake, in Lotte Confectionery. Lotte Group Chairman Shin Dong-bin continued to buy stakes in Lotte Chemical, Lotte Confectionery, Lotte Chilsung and Lotte Insurance since May through Sept. 13.The conglomerate confirmed all of the stock purchases which will help strengthen their influence over Lotte Shopping, the mainstay business unit of Lotte Group.
Experts say they seem to be in a power struggle to claim a bigger say or a bigger control in management when Shin Kyuk-ho, their father passes away.
“Offspring of chaebol (or conglomerate), big or small, have fought over the management control as was shown in the case of the Hyundai Group siblings back in 2000. Lotte won’t be the exception,” Song Chang-seok, a professor at Soongsil University, told The Korea Times by telephone.
In early the 2000s, a fierce fight over the control of then Hyundai Group ensured between the sons of the group’s chief, which resulted in three split business groups ― Hyundai Motor Group led by Chung Mong-koo, Hyundai Heavy Industry Group headed by Chung Mong-joon, and Hyundai Group controlled by the late Chung Mong-hun.
But Lotte balked at the suspicion. “The reason behind their recent acquisitions of stakes in Lotte affiliates is no other than supporting their share prices that have fallen sharply amid a prolonged slump,” a Lotte Group official said asking not to be named.
As of Monday, stocks in Lotte Chemical have fallen more than 20 percent so far this year, with Lotte Confectionery losing 13 percent since Apr. 16 and Lotte Chilsung shedding 7.3 percent since Apr. 25.
Shin Dong-joo, 59, and Shin Dong-bin, 58, are the two sons of the group founder Shin Kyuk-ho who serves as the “general chairman” supervising the group’s overall businesses in Korea and Japan, said the official.
Currently, Shin Dong-bin and Shin Dong-joo own a 13.46 percent stake and a 13.45 percent stake, respectively, in Lotte Shopping. They will be able to strengthen their control over the unit by raising their stakes in other Lotte affiliates such as Lotte Confectionery and Lotte Chilsung.
After the recent stock buying, Lotte Confectionery has a 7.86 percent stake in Lotte Shopping and Lotte Chilsung holds a 3.93 percent stake in the company. For Lotte which has a total 74 affiliates in Korea and dozens of affiliates in Japan, more than 40 affiliates are intertwined with each other through cross shareholding, the company said.
Shin Kyuk-ho sent the elder Shin to Japan to take charge of operations there and the younger Shin to stay in Korea from the outset but the Korean operations have grown ten times bigger than the Japanese operations in the past decades, it said.
As part of efforts to fill the widening gap between the operations in Korea and Japan, the professor said “Japan Lotte seems to be stepping up its drive in Southeast Asian markets such as Thailand and Indonesia.”
Japan Lotte, which focuses on the confectionery business, began production in its Thailand plant in July and plans to start the operation of its Indonesian plant in November to absorb local demand, the Lotte official said.
Regarding the concerns about a possible “cannibalization” arising from the fact that Lotte Group is aggressively expanding into Southeast Asian markets away from the saturated domestic market, the official said “Lotte and Japan Lotte are targeting different markets in Southeast Asia to avoid cannibalization and their businesses do not overlap except for the confectionery division.”
Japan Lotte spokesman Tsuji Kiyoshi was not reachable for comment.
Lotte Group is Korea’s fifth-biggest conglomerate by assets, excluding public companies, and its total sales were 82.3 trillion won for the whole of 2012.