South Korea's Hotel Lotte postpones $4.5 billion IPO indefinitely after raids

Mon Jun 13, 2016 6:33am EDT
 
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By Joyce Lee and Lee Chang-ho

SEOUL (Reuters) - South Korea's Hotel Lotte Co Ltd said on Monday it was indefinitely postponing its IPO worth up to $4.5 billion, as the wider Lotte Group reeled from the impact of a series of raids on group firms by prosecutors.

The move is a blow to the company's ambitious expansion efforts, which include a push to make its duty free retail arm the world's largest. The duty free business, which accounts for most of Hotel Lotte's revenue, ranks third globally by sales.

Friday's raids on Lotte Group headquarters, Hotel Lotte and other Lotte companies were part of an investigation into a possible slush fund, three people with direct knowledge of the matter have said.

In addition to the derailment of an IPO billed as the world's biggest this year, the aftermath of the raids saw Lotte Chemical Corp (011170.KS: Quote), the conglomerate's biggest listed unit, bow out of bidding for U.S.-based Axiall Corp AXLL.N. Share prices of group firms slid on Monday.

"This will freeze the group's investment decisions for the foreseeable future," said Chung Sun-sup, CEO of research firm Chaebul.com.

The IPO was intended in part to simplify the ownership structure and improve corporate governance at the Lotte Group, South Korea's fifth-largest family run conglomerate, or chaebol, after a highly public feud over succession among the founding Shin family drew wide public criticism.

Friday's raids were the largest in terms of manpower mobilized involving a single corporate group in South Korea, Chaebul.com's Chung said. Prosecution officials could not immediately be reached on Monday to confirm that.

About 200 prosecutors and investigators searched locations including Lotte Group headquarters and offices of affiliates, two prosecution sources have said.   Continued...

 
An investigator from the prosecution office carries boxes containing confiscated articles at Lotte Group's headquarters in Seoul, South Korea, June 10, 2016.   Choi Jae-gu/Yonhap via REUTERS