South Korea probe into Lotte Group widens with more raids

Tue Jun 14, 2016 2:17pm EDT
 
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By Joyce Lee and Erwin Seba

SEOUL/LAKE CHARLES, La (Reuters) - South Korean prosecutors expanded their investigation into Lotte Group on Tuesday with raids on at least ten firms including its biggest listed unit Lotte Chemical (011170.KS: Quote), heaping further pressure on the country's fifth-largest conglomerate.

The probe, which included raids by a 200-strong team on the group's headquarters and other firms last week, ranks as the largest into a South Korean family-run "chaebol" in terms of the number of investigators mobilised, analysts said.

Prosecutors are looking into a possible slush fund as well as breach of trust involving transactions among the group's companies, people familiar with the matter said on Friday.

The fallout from the probe has already seen the derailment of a planned initial public offering worth up $4.5 billion for Lotte's hotel and duty free unit, as well as Lotte Chemical bowing out of bidding for a U.S. company.

But Lotte Group will revive Hotel Lotte's IPO plans with an aim to list around the end of this year, the group's chairman, Shin Dong-bin, told reporters on Tuesday in Lake Charles, Louisiana, at an event to mark work starting on the construction of a chemical plant.

The IPO would potentially have been the world's biggest this year.

"I am really sorry to cause everyone concern. I feel accountable, and am telling all companies to cooperate," Shin said, in his first public remarks on the investigation.

Analysts said deal-making for Lotte, one of the country's most acquisitive conglomerates, is likely to be on hold for some time. A potential acquisition of a U.S duty free operator worth 1.7 trillion won ($1.5 billion) is in doubt now that the IPO has been pulled, a Lotte Duty Free official told Reuters on Tuesday.   Continued...

 
A flag bearing the logo of Lotte Hotel flutters at a Lotte Hotel in Seoul, South Korea, March 25, 2016.  REUTERS/Kim Hong-Ji/File Photo