Management Control Dispute Rumors at Lotte Holdings: Will It Become the Second Hanjin Kal?

Shin Dong-joo, Chairman of SDJ, and Shin Dong-bin, Chairman of Lotte Group, are returning to their seats after paying tribute at the funeral ceremony of the late Shin Kyuk-ho, Honorary Chairman of Lotte Group, held on the morning of January 22 at the Lotte World Mall Concert Hall in Songpa-gu, Seoul. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Koh Hyung-kwang] As the management dispute between brothers in Lotte Group flared up again, Lotte Holdings' stock price rose sharply for two consecutive days. This is similar to the recent surge in Hanjin KAL's stock price amid Hanjin Group's management dispute. However, the market widely expects that the upward trend of Lotte Holdings will not last long due to the large shareholding gap between the Lotte Group brothers.

According to the Korea Exchange on the 30th, Lotte Holdings closed at 40,100 won on the previous day in the KOSPI market, up 7.5% from the previous trading day. Following a rise to the daily price limit (29.97%) the day before, it rose sharply for two consecutive days. This was largely influenced by the possibility of a recurrence of the management dispute as SDJ Corporation Chairman Shin Dong-joo demanded the dismissal of Shin Dong-bin, Chairman of Lotte Group, from the board.

SDJ Corporation submitted a shareholder proposal on the 28th ahead of the scheduled Lotte Holdings regular shareholders' meeting in June, including the dismissal of Shin Dong-bin from the board and amendments to the articles of incorporation. The proposal argued that Shin Dong-bin should be dismissed from the board due to responsibility for the significant damage to Lotte Group's brand value, reputation, and corporate value following his conviction in the October trial related to the state affairs manipulation and management corruption case last year.

Chairman Shin Dong-joo claimed, "No one, including the convicted party, has taken responsibility at Lotte Holdings, nor have they taken steps to identify causes or prevent recurrence." He added, "In April this year, Shin Dong-bin assumed the positions of CEO and chairman of Lotte Holdings and owner of the Lotte sports team, placing the company in an incomprehensible state from the perspective of corporate compliance and ethics."

On the other hand, Shin Dong-bin's side seems largely unconcerned. This is due to the large shareholding gap with Shin Dong-joo's side. As of the end of last year, Shin Dong-bin's stake in Korea Lotte Holdings was 11.7% of common shares. Including affiliated companies' friendly shares, the total shareholding reaches 45.3%. In contrast, Shin Dong-joo's stake is only 0.2%. From 2015 to 2018, Shin Dong-joo submitted proposals five times at the Japanese Lotte Holdings shareholders' meetings to dismiss Shin Dong-bin and reinstate himself as a director, but all failed for this reason.

Therefore, the securities industry views the possibility of an actual shareholding competition in Lotte Group as low. A financial investment industry official said, "In Hanjin's case, the shareholding gap between brothers was not large, leading to a competition for shares and a prolonged upward trend in stock prices, but in Lotte's case, the large shareholding gap means the stock price is likely to fade soon."

This content was produced with the assistance of AI translation services.