The Korea Times

Hotel Lotte IPO hits snag on poor earnings

- By Kang Seung-woo ksw@ktimes.com

Hotel Lotte’s plan to go public is on the skids due to continuing earnings deteriorat­ion from China’s economic retaliatio­n over Korea’s deployment of a U.S. missile defense shield here.

In addition, a leadership vacuum is further thwarting the business group’s potential $4.5 billion (4.76 trillion won) initial public offering (IPO) for the hotel.

According to market observers, Tuesday, Lotte Group has shelved the IPO until the struggling hotel’s business recovers.

Hotel Lotte held a general meeting of shareholde­rs last week, but the issue was not on the agenda. Also, the main advisers for the planned offering — Mirae Asset Daewoo, Citigroup and Bank of America Merrill Lynch — are also said to have not drawn up a specific timeline.

The group held a conference with market analysts last month and said it plans to list its affiliates to ensure growth and profits, showing signs that Lotte is struggling to deal with domestic and foreign challenges.

Lotte’s China woes were initiated by the business group’s provision of its high-end golf course in Seongju, North Gyengsang Province, in February 2017 for the site of a U.S. Terminal High Altitude Area Defense (THAAD) battery. This angered Beijing, which claimed the missile defense system could be used to spy on its own missile program.

In response, the Chinese government banned all package tours to Korea from March of last year — a decision that is still hitting Lotte’s businesses hard.

According to Hotel Lotte, Lotte Duty Free’s operating profit fell 99.2 percent to a record low of 2.5 billion won last year from 330.1 billion won the previous year due to the diplomatic row.

Sales of the country’s biggest duty free shop declined by 1 billion won to 5.45 billion won last year from the previous year.

As a result, Lotte decided last month to shut down three out of four money-losing concession­s at Incheon Internatio­nal Airport Terminal 1 by July mainly due to a plunge in the number of Chinese tourists, a key source of income for Lotte, along with the refusal by airport authoritie­s to cut rental fees.

The three concession­s cover cosmetics, perfumes, clothes, leather products and other luxury goods.

Lotte Chairman Shin Dong-bin had sought to take the hotel unit — the group’s de facto holding firm — public to reduce the influence of Japanese shareholde­rs and improve the group-wide governance structure.

However, Shin’s imprisonme­nt in February on bribery charges linked to the corruption scandal that led to the ousting of former President Park Geun-hye last year is also putting the IPO plan on hold.

Meanwhile, Lotte held a ceremony to mark its 51st founding anniversar­y, but the celebratio­n was low-key due to the leadership vacuum.

 ??  ?? Kim Jung-hwan Hotel Lotte CEO
Kim Jung-hwan Hotel Lotte CEO

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