[Why&Next] Taekwang Embraces Aekyung Industrial... Homeshopping War with 'In-Law' Lotte

Lotte and Taekwang: Two Decades of Conflict Resurface
Past Disputes Revisited Amid New Friction Over Aekyung Industrial Deal
Concerns Grow Over Uncertainty in Corporate Strategy as Taekwang Faces Successive Disputes

Taekwang Group, ranked 59th among Korean conglomerates, is accelerating its entry into the distribution market. After acquiring Aekyung Industrial—the company that served as the foundation of Aekyung Group—Taekwang has now entered into a full-scale battle with Lotte Group over management control of Lotte Homeshopping. With core affiliates showing deteriorating results due to more than a decade of legal risks surrounding former chairman Lee Hojin, Taekwang is actively restructuring its business through aggressive mergers and acquisitions (M&A). However, the group has been embroiled in ongoing disputes with target companies, earning a reputation as a "troublemaker" in the distribution industry.

According to the Financial Supervisory Service's electronic disclosure system on March 27, Aekyung Industrial announced the previous day that its largest shareholder had changed from Aekyung Group's holding company, AK Holdings, to Beautylife One and Taekwang Industrial. Beautylife One is a special purpose company (SPC) invested in by T2 Private Equity and Yuanta Investment, and it will hold a 31.56% stake in Aekyung Industrial. The remaining 31.56% will be held by Taekwang Industrial.

With Taekwang Group completing its acquisition of Aekyung Industrial, the market's attention is now focused on the management dispute over Lotte Homeshopping.

Taekwang Industrial holds a 27.99% stake in Lotte Homeshopping and, together with affiliates such as Daehan Synthetic Fiber (10.21%) and T-Sys (6.78%), has secured a combined 44.98%, making it the second-largest shareholder. The largest shareholder is Lotte Shopping, which holds 53.47% of the shares.

The conflict between the two sides escalated in 2023. Taekwang filed a complaint with the Fair Trade Commission, alleging that Lotte Homeshopping inserted Lotte Group affiliates as intermediaries in transactions with suppliers to collect commissions. Taekwang argued that direct transactions were possible but unnecessary steps were added, transferring profits to affiliates. The Fair Trade Commission, however, decided not to initiate an investigation, stating that the allegations alone did not provide sufficient grounds to verify the facts.

Subsequently, when Taekwang-affiliated directors voted against the approval of internal transactions at the Lotte Homeshopping board meeting on January 14 of this year, the proposal was rejected. In response, Lotte increased the number of its directors on the board from five to six at a recent shareholders' meeting and reconvened the board on March 24 to push the proposal through.

In response, Taekwang Industrial recently opposed the reappointment of Jaekyem Kim as CEO of Lotte Homeshopping, demanding his resignation and leaving open the possibility of pursuing his dismissal. The Taekwang side stated, "We have sent a request to convene an extraordinary shareholders' meeting to deliberate the dismissal of CEO Jaekyem Kim," adding, "If the dismissal is rejected at the extraordinary meeting, we are considering filing a lawsuit and seeking an injunction to suspend his duties." While the date of the extraordinary shareholders' meeting has yet to be determined, it must be held within six weeks of March 17, the date the dismissal request was delivered to Lotte Homeshopping, meaning it will take place by April 28 at the latest.

Meanwhile, Lotte Homeshopping is strongly pushing back. Lotte Homeshopping countered, "This business structure has operated smoothly under the board for the past 19 years." The company characterized Taekwang's challenge as "a belated and petty objection," and stated, "Protecting the board's independence and decision-making is an unavoidable measure in the face of baseless claims," announcing a hardline response.

Lotte and Taekwang are linked through marriage. Lee Hojin, former chairman of Taekwang Group, is married to the daughter of Lotte founder Shin Kyuk-ho's younger brother, Shin Sun-ho, making him a nephew-in-law. Despite this, the two sides fiercely competed for the acquisition of Woori Homeshopping (now Lotte Homeshopping) in the mid-2000s. Taekwang bought up shares in Woori Homeshopping in a hostile M&A attempt, but Kyungbang, then the largest shareholder, transferred its 53% stake to Lotte. Since then, Taekwang, as the second-largest shareholder, has repeatedly clashed with Lotte by demanding higher dividends and increased management oversight. The unique nature of the homeshopping business, which is subject to periodic reauthorization, has also fueled ongoing disputes over management responsibility, deepening the rift. This is also why the corporate name "Woori Homeshopping" is still used for the legal entity.

Many observers believe that conflicts intensified after Lee Hojin was pardoned. Following a special pardon by the Yoon Suk-yeol administration, Lee was able to return to management, and Taekwang's exercise of shareholder rights has become much more proactive than before.

Since then, Taekwang has taken an aggressive stance by demanding higher dividends, monitoring the board, and responding assertively at shareholders' meetings. Some in the industry view this as a reflection of lingering resentment over past conflicts. However, Taekwang maintains that it is merely exercising legitimate shareholder rights, and there are also perspectives that see these actions as part of the group's management normalization process.

The conflict between the two groups entered a new phase after Taekwang’s acquisition of Aekyung Industrial. On the previous day, Aekyung Industrial unveiled its blueprint to transform into a global total beauty company through business restructuring and investment. The company aims to increase the proportion of cosmetics sales—which stood at around 32% last year—to over 50% by 2028, and to diversify its overseas markets.

To implement this business strategy, the company will also restructure its organization. The existing cosmetics and household goods-centric system will be subdivided into makeup, skincare, personal beauty, and home & dental care. Each division will be granted authority and responsibility to accelerate decision-making, and a separate digital marketing division will be established to support strategies tailored by country and channel.

Additionally, Taekwang Group plans to leverage its homeshopping and T-commerce channels to boost distribution competitiveness, as well as to develop new media-based distribution models. As a result, industry observers note that conflicts are inevitable, since Aekyung Industrial will need to distribute its products through existing channels such as Lotte Homeshopping. This move by Taekwang is seen as a strategic step to make Lotte Homeshopping a key distribution channel for Aekyung Industrial,with the two groups now engaged in a strategic conflict for dominance over distribution channels that goes beyond a mere shareholder dispute.

An industry insider commented, "As Taekwang’s exercise of shareholder rights becomes intertwined with its distribution strategy, the dispute is escalating into a conflict over business domains." Another insider predicted, "With Lotte aiming to defend management control and Taekwang seeking to expand its influence, the conflict is likely to persist structurally."