Lotte Group has been embroiled in the fight between brothers - Lotte founder Shin Kyuk-ho's two sons Shin Dong-bin and Shin Dong-joo
The battle came to the surface on Monday when the founder flew to Japan together with his five family members including Shin Dong-bin. The visit to Japan was in four years. When he visited Lotte Holdings located in Shinjuku, Tokyo, he ordered six board members including Shin Dong-bin and Takayuki Tsukuda, president of Lotte, to resign, pointing their names with his hand. Beside him, there was his eldest son Shin Dong-joo. However, later on, the founder Shin reportedly told Tsukuda to "take care of (the company)." Because of this, some industry observers said Shin may have health problems.
Shin Dong-bin, who stayed in Japan, was told that he was fired at night of the same day and immediately convened a board members and held an urgent meeting the next morning.
During the meeting, the board members sacked the founder Shin on the ground that he attempted to fire board members without going through proper procedures. Instead, he was assigned to be an honorary president of Lotte Holdings. At the meeting, the founder was not present.
On the day, Lotte Group released a statement, saying that "Shin Dong-joo and some of his family members brought the founder unilaterally to Japan and announced the resignation of the Lotte Holdings' board members,” pointing Shin Dong-joo as the mastermind behind the issue.
Shin Dong-bin was unanimously assigned as the chief of Lotte Holdings by 15 board members. Accepting the position, he said, "With the responsible attitude, I will do my best for Lotte business in Korea and Japan."
The first revolt by Shin Dong-joo setting his father at the head was suppressed in a day but industry watchers said the battle between the brothers has started now. Currently, Shin Young-ja, a daughter of the founder, sides with Shin Dong-joo. As Shin Dong-bin is ahead in the succession procedure, other alienated siblings are forming allies.
Considering the complicated share structures and share ratio among siblings, the similar battle may unfold again down the road. Shin Dong-bin has not yet inherited share, which will cement his management rights, from his father. So far, the founder has played a role in arbitrating the battle between the brothers but this will be no more expected.
Lotte Group's corporate governance is a complex structure. Japanese Lotte Holdings controls Lotte Korea's key affiliates including Lotte Shopping through Lotte Hotel. Lotte Hotel has the largest share of Lotte Shopping, the key affiliate, with an 8.83 percent stake, and the shares of Lottel Hotel is owned by Lotte Holdings Japan (19.07%) and Lotte-related investors in Japan.
The share ratios of Lottel Holdings Japan owned by Shin Dong-bin and Shin Dong-joo are around 20 percent each. The founder's share ratio is higher than the two sons with 28 percent.
Japan's unlisted company Kwang yoon sa, which has a 27.65 percent stake of Lotte Holdings Japan, is gaining spotlight. The founder reportedly has a 50 percent stake of Kwang yoon sa, which means that the son would inherit the stake can firmly have the management rights of Lotte Group. Industry watchers said that a fierce battle to get the share from is expected.
Currently, the two have similar ratio of Lotte Group Korea's key affiliates. Shin Dong-bin has a 13.46 percent stake of Lotte Shopping while Shin Dong-joo has a 13.45 percent stake. The daughter has a 0.74 percent stake of Lotte Shopping.
Market observers said Shin Dong-bin who became the chief of Lotte Holdings Japan through the board meeting on Tuesday is expected to ramp up efforts to get more friendly shares to increase his dominant power in Lotte Holdings Japan.
