Shares of Lotte units plunge on prosecution probe


Shares of Lotte Group subsidiaries took a nosedive on Monday amid a widening prosecution probe into the conglomerate over suspicions of slush funds and other malfeasance.

Flagship retail unit Lotte Shopping tumbled 5.38 percent to 211,000 won ($179.9) on the main bourse, and the chemicals subsidiary sank 3.91 percent to 258,000 won. In a regulatory filing earlier in the day, Lotte Chemical said it had withdrawn its bid to take over U.S.-based chemicals maker Axiall Corp.

Lotte Confectionery plunged 5.97 percent to 197,000 won with Lotte Chilsung, Lotte Food, Lotte Himart, and two other listed units also taking a hit. The benchmark Korea Composite Stock Price Index finished 1.91 percent down at 1,979.06.

It marked the second consecutive session of sharp declines.

Lotte shares tanked on Friday after prosecution investigators raided Lotte’s headquarters offices and six of its affiliates, as well as the chairman’s office and residence, expanding their investigation into alleged embezzlement and malpractice.

A day later, prosecutors called in a number of top group executives for questioning over suspicions that the group created slush funds mainly while handling transactions between its affiliates.

Lotte, South Korea’s fifth-largest family-controlled conglomerate, has 89 Korean subsidiaries with more than 100 trillion won ($85.3 billion) in assets.

The probe comes amid a bitter sibling fight over group control.

Lotte Group Chairman Shin Dong-bin now controls the retail giant after winning shareholder support at Lotte Holdings’ previous shareholders’ meeting in March. He remains locked in a bitter succession feud with his elder brother Dong-joo, the former vice chairman of the Tokyo-based holding firm.

The investigation also forced Hotel Lotte Co. to indefinitely postpone its proposed initial public offering as senior officials were under investigation for alleged bribery related to its duty-free business. The delay has sparked market speculation that the conglomerate may suffer a liquidity crunch.

Lotte’s hotel and duty-free unit had been preparing to list its shares on the Seoul bourse on June 29. After failing to renew the operating license for a duty-free shop at Lotte World Tower in the posh Gangnam Ward late last year, the group has been seeking to regain government approval for the license this December.

Meanwhile, shares of Hotel Shilla, a key rival of Hotel Lotte, closed up 1.07 percent at 66,300 won on expectations Lotte is unlikely to obtain government approval for a duty-free shop in the wake of the prosecution probe. Hotel Shilla, a unit of South Korea’s top conglomerate Samsung Group, operates luxury hotels and duty-free shops.

Source: http://www.koreaherald.com/view.php?ud=20160613000821


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