Second Largest Shareholder Taekwang Industrial "Opposes" Lotte Home Shopping Headquarters Acquisition

Taekwang Industrial, the second largest shareholder of Lotte Homeshopping, has expressed opposition to the plan to purchase the headquarters building and land in Yangpyeong-dong, Yeongdeungpo-gu, Seoul.

On the 23rd, Taekwang Industrial stated in a press release, "We strongly regret that despite clear defects revealed during the board resolution process held last month, the board did not reverse its previous position." Taekwang Industrial, including its affiliates, holds 44.98% of Lotte Homeshopping shares as of the end of last year, making it the second largest shareholder of Lotte Homeshopping.

Lotte Homeshopping CEO Kim Jae-gyeom

At the board meeting held on July 27, Lotte Homeshopping decided to purchase the leased office building land and building located in Yangpyeong-dong 5-ga, Yeongdeungpo-gu, Seoul, from Lotte Corporation and Lotte Wellfood Co., Ltd. for 203.9 billion KRW. The real estate is owned 64.6% by Lotte Corporation and 35.4% by Lotte Wellfood.

Taekwang Industrial pointed out that purchasing the headquarters building and land is inappropriate given Lotte Homeshopping’s severe management crisis. Taekwang Industrial stated, "Lotte Homeshopping’s sales decreased by 16% and operating profit by 88% compared to the same period last year in the first quarter of this year," adding, "there is no need to purchase the office building currently being used without inconvenience under these circumstances."

They continued, "This real estate purchase plan does not stem from Lotte Homeshopping’s necessity but appears to have been requested by Lotte Corporation to secure cash," and criticized, "Through this transaction, Lotte Homeshopping will give up more than 200 billion KRW in cash assets and instead tie up funds in fixed assets that are volatile and less liquid."

Furthermore, they said, "Considering the risk of losses based on macroeconomic indicators including real estate market trends and the risk of liquidity shortage in case of operational failure, this matter should be conservatively and strictly reviewed," adding, "The materials provided by Lotte Homeshopping to the board only vaguely mentioned an improvement effect of 1.7 billion KRW annually (based on ordinary profit) based on optimistic future estimates, without any mention of various potential risk factors."

Taekwang Industrial also emphasized that there were clear issues during the board resolution process. They criticized, "The purchase price was calculated using a weighted average method of cost approach, comparable transaction approach, and income capitalization approach at a ratio of 20:40:40, rather than the cost approach stipulated by the Ministry of Land, Infrastructure and Transport’s 'Regulations on Appraisal,' resulting in an appraisal price about 30 billion KRW higher than the conservative evaluation method," and stated, "This violates the fundamental principle of the board process that decisions must be made based on complete and accurate information."

Taekwang Industrial warned that if Lotte Homeshopping’s management proceeds with the purchase of the headquarters building and land, it could constitute a legal breach of fiduciary duty. They said, "As the second largest shareholder of Lotte Homeshopping, we plan to take various measures including all legal procedures to rectify this," adding, "It would be desirable for the Lotte Group to take wise and prompt action first for the benefit of both the company and shareholders."

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