South Korea’s fifth-largest conglomerate Lotte Group will completely remove its cross-shareholding ties among affiliates by merging six unlisted companies with its recently launched holding company in a move to improve overall management efficiency and enhance business transparency.
Lotte Group’s six affiliates each held board meetings on Tuesday and decided to merge investment units with Lotte Corp., the retail giant’s holding company established in October. The six affiliates are: Lotte GRS, Fuji Film Korea, Lotte Logistics, Lotte International, and Daehong Communications.
Once the reorganization is completed, Lotte Group will have removed all of its cross-shareholding ties among affiliates, and the number of subsidiaries with intra-group ownership will be reduced to zero.
Since Lotte Group Chairman Shin Dong-bin has vowed to resolve its cross-shareholding structure in August 2015, the conglomerate has continuously put out efforts to simplify its ownership structure based on multi-layered cross-shareholding among affiliates to improve transparency. Before June 2014, Lotte Group was engaged in total 748,963 circular shareholding loops.
The conglomerate launched a holding company in October last year, to simplify its management structure to improve business transparency and separate risk between operating and investment entities to improve efficiency.
Lotte Corp. and six unlisted affiliates plan to seek approval of the merger during a shareholders meeting on Feb. 27. When approved, Lotte will be required to promote the merger by Apr. 1 with shareholders given until Mar. 19 to claim for the purchase of their shares.
Meanwhile, Lotteria, Daehong Communications, Lotte International, and Fuji Film Korea sold off their shares in Lotte Capital Co. and Lotte Insurance Co. to Hotel Lotte Co. and Hotel Lotte Pusan Co. in a bloc deal last month. The move was made to prevent Lotte Corp. from owning shares in financial affiliates after the merger, which is stipulated by the country’s fair trade law that bans a general holding company from owning shares in financial affiliates.
By Lee Han-na and Lee Eun-joo
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