[Heirs] Korea-Japan Lotte Goes 'All-In' on Successor... How Is Shin Youyeol's Report Card?

Lotte Holdings Stake at Only 0.3%

Inheritance and Gift Tax Burden... Possibility of Gradual Share Purchases

Securing Support Base in Japan Also Key for Succession

Appointed as Co-CEO of New Bio Business

Challenges Ahead, Includ

#At around 10:15 p.m. on the 22nd of last month, Shin Dongbin, Chairman of Lotte Group and younger brother of Shin Youngja, Chairwoman of the Lotte Foundation—who was known as the eldest daughter of the late Lotte Group founder Shin Kyukho and a first-generation female leader in Korea’s retail industry—entered the funeral hall at Severance Hospital in Seodaemun-gu, Seoul, where her bier was set up. Having stayed in Japan around the Lunar New Year holiday to consider business matters, Chairman Shin rushed to change his schedule and paid his respects late at night, just a day before the funeral, upon receiving the news of her passing.

Following Chairman Shin and other group executives as they exited the elevator and walked toward the funeral hall, his eldest son, Shin Youyeol—Head of Future Growth at Lotte Holdings and Co-CEO of Lotte Biologics (Vice President)—also accompanied them, maintaining a few steps’ distance. After offering his condolences, Vice President Shin also left the funeral hall shortly after Chairman Shin and his entourage. This scene encapsulates Shin Youyeol’s status within the group. As the successor, he is expected to step forward whenever key internal or external issues arise, but he must prove his capabilities through management experience and further strengthen his position before he can fully match his father’s stride—something this moment seemed to symbolize.

Shin Dongbin, Chairman of Lotte Group (front row, right), is entering the funeral hall at Seoul Sinchon Severance Hospital where the bier of Shin Youngja, Chairwoman of the Lotte Foundation, has been set up. In the back row, far left, is Shin Youyeol, Head of Future Growth at Lotte Holdings and Co-CEO of Lotte Biologics. Photo by Kim Heungsun

Shin Youyeol Steps Up in New Bio Business... Full Support from Lotte Group

According to the Financial Supervisory Service’s electronic disclosure system on the 22nd, Lotte Biologics raised 150 billion won in capital through a paid-in capital increase on March 3. In this latest round, Lotte Holdings contributed about 91.1 billion won, Lotte Hotel provided 28.6 billion won, and the remainder came from Japan’s Lotte Holdings.

Lotte Biologics is the company where Vice President Shin was promoted to CEO during Lotte Group’s regular year-end executive reshuffle last year. Like his father, Vice President Shin worked at Nomura Securities after graduating from university, then joined the Japan branch of Lotte Chemical in 2022. The following year, he was appointed Head of Future Growth at Lotte Holdings, where he has been leading new business and global strategy initiatives.

Notably, Lotte Biologics is the first domestic business site where Vice President Shin has been named to the top position, and the group is pouring its full capabilities into this venture. Lotte Group plans to invest 4.6 trillion won by 2030 to operate three biopharmaceutical manufacturing plants for Lotte Biologics.

Previously, in December 2022, Lotte Biologics secured 210.6 billion won from Lotte Holdings and Lotte Holdings Japan to finance the acquisition of its Syracuse plant in the United States and to operate its U.S. subsidiary. In December last year, Hotel Lotte acquired 3,076,890 shares out of the 3,183,324 forfeited shares generated during Lotte Biologics’s paid-in capital increase, investing a total of 214.4 billion won.

To date, Lotte Biologics has raised over 1.2 trillion won from group affiliates through six rounds of paid-in capital increases. Initially, Korea’s Lotte Holdings and Japan’s Lotte Holdings were the main sources of capital injection, but since last year, Hotel Lotte has emerged as a “relief pitcher.” Hotel Lotte is owned by Lotte Holdings (19.7%) and the Japanese Lotte investment company LSI, where Vice President Shin serves as CEO. As the linchpin connecting the Korean and Japanese Lotte operations, Hotel Lotte is regarded as a core component of the third-generation succession structure within the group.

The Lessons from the 'Battle of Lotte Brothers'... What About the Third-Generation Succession?

After Chairman Shin took office, Lotte reorganized its complex web of 750,000 cross-shareholdings and mutual shareholdings, launching Lotte Holdings in October 2017 to establish a single holding company-centered governance structure. The second-largest shareholder of Lotte Holdings after Chairman Shin is Hotel Lotte, with an 11.1% stake, while Hotel Lotte’s largest shareholder is Japan’s Lotte Holdings with a 19.07% stake. In addition, Kwang Yoon Sa of Japan is the largest shareholder of Lotte Holdings, holding 28.14%. This creates a governance structure that connects Kwang Yoon Sa → Lotte Holdings → Hotel Lotte → Lotte Holdings, ultimately overseeing the Korean Lotte affiliates.

The largest shareholder of Kwang Yoon Sa, which sits atop the Korea-Japan Lotte governance pyramid, is Shin Dongjoo, Chairman of SDJ Corporation (holding a 50.3% stake), who stepped back from management after the so-called "Battle of Lotte Brothers" with Chairman Shin Dongbin in 2015. However, Chairman Shin Dongbin has managed to retain management control with the support of the employees’ stock ownership association (27.8%) and the executives’ stock ownership association (5.96%), both of which have higher combined ownership in Japan’s Lotte Holdings than Kwang Yoon Sa.

Vice President Shin also joined Lotte Holdings Japan as a manager in 2020 and was appointed internal director at the regular shareholders' meeting in June 2024, becoming deeply involved in company work. However, Chairman Shin Dongjoo has opposed Vice President Shin’s appointment as an internal director, stating that “it is inappropriate for someone whose management capabilities have not been verified to join the board,” and has continued to propose his own reappointment as a director at every annual shareholders’ meeting, seeking a return to management. To counter this and strengthen his influence within the group, Vice President Shin must achieve solid management results and foster shareholder-friendly policies to build support among Japanese Lotte shareholders.

The challenge lies in the performance of the new businesses overseen by Vice President Shin Youyeol. Lotte Biologics’s results have been struggling. In 2024, the company recorded sales of 234.4 billion won, an operating loss of 80.1 billion won, and a net loss of 89.7 billion won, swinging into the red compared to the previous year. Last year, sales fell below 200 billion won to 196.1 billion won, while operating and net losses widened to 132.6 billion won and 141.4 billion won, respectively, compared to the previous year.

Industry observers note that since 99.28% of Hotel Lotte’s shares are held by Lotte Holdings and other Japanese investment affiliates, Lotte Biologics’s management results will serve as a key metric for both Korean and Japanese Lotte shareholders to evaluate Vice President Shin’s capabilities and decide whether to place their trust in him.

Shin Youyeol Purchases Lotte Holdings Shares... Gradual Succession Possible Amid Inheritance Tax Burden

Shin You-yeol, Head of Future Growth at Lotte Holdings (center), is visiting the Lotte Innovate exhibition hall at CES 2025, the world's largest consumer electronics and information technology (IT) exhibition, held last January at the Las Vegas Convention Center in Nevada, USA. Photo by Joint Press Team

As of January 30, Vice President Shin’s ownership in Lotte Holdings—the top-tier company in Lotte’s domestic governance structure—stood at just 0.03%. After making his first open-market purchase of 7,541 common shares of Lotte Holdings in June 2024, securing a 0.01% stake, he acquired a total of 34,490 shares through six purchases by December last year. It appears he is gradually increasing his stake using funds from his salary and dividends.

However, considering that he is preparing for third-generation succession at the management front line, the small ownership stake is seen as a weakness. Even compared to other members of the Lotte family, Jang Jeongan, the granddaughter of the late Honorary Chairman Shin, holds a 0.07% stake, and Shin Yumi, the youngest daughter and former advisor to Lotte Hotel, holds 0.04%—both higher than Vice President Shin’s stake. After Chairwoman Shin disposed of all her Lotte Holdings shares, worth 67 billion won, last July to cover inheritance taxes, and strategically sold listed Lotte affiliate shares by year-end, attention is now focused on whether Vice President Shin will further increase his holdings.

If Vice President Shin inherits or is gifted Chairman Shin Dongbin’s shares, he could expand his influence over the holding company, but the substantial tax burden is a significant obstacle. Chairman Shin is the largest shareholder of Lotte Holdings, with 13,683,202 common shares (13.04%), valued at 443.3 billion won based on the closing price of 32,400 won as of the 20th. Under the current inheritance and gift tax law, the highest tax rate of 50% applies to stock transfers exceeding 3 billion won. If the 20% premium for large shareholders is added, the total tax bill rises to 60% of the share value, requiring more than 266 billion won in taxes.

An industry insider commented, “Vice President Shin is likely to choose a strategy of gradually increasing his stake while maintaining key management roles as part of his management training, using responsible management as a justification.”

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