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Family feud-stricken S.Korean chaebol vows to streamline complex ownership

Xinhua, August 11, 2015 Adjust font size:

Chairman of Lotte Group, South Korea ' s fifth-largest conglomerate stricken with family feud for succession, vowed Tuesday to streamline its complex ownership structure by the end of this year to ease growing dissatisfaction with the group's opaque corporate governance.

Lotte Group Chairman Shin Dong-bin told a press conference that more than 80 percent of circular shareholdings among the group's affiliates would be simplified by the year end, saying that the group would be changed into a holding company in the long run by streamlining all the remaining cross-shareholdings in the end.

The Seoul-based Lotte Group with 80 units in South Korea is controlled by Lotte Hotel, which is controlled by the Tokyo-based Lotte Holdings and 12 asset management companies based in Japan.

Such ownership caused public criticism here that South Korea's national wealth, which Lotte affiliates earned, has been drained away to Japan.

Some civic group activists boycotted the products and services from Lotte, South Korea's largest retailer that span department stores, discount chains, hotels, amusement park and chemicals generating some 70 billion U.S. dollars in revenue a year, more than 20-fold the revenue in its Japanese counterpart.

Lotte was set up in Japan in 1948 as a chewing gum maker after Shin Kyuk-ho, the group's founder and father of the current chairman, migrated to Japan under the 1910-45 Japanese colonial rule of the Korean Peninsula.

The founder established Lotte Confectionery in Seoul to expand businesses to his home country after diplomatic ties between Seoul and Tokyo were normalized in 1965. The Seoul-based group grew faster than Japan's Lotte to more than 90 billion U.S. dollars in assets in 2014. "Lotte Hotel is not a path to drain away national wealth to Japan,"said Shin Dong-bin, the founder's second son, noting that the hotel chain operator was a tool that enabled Japan-based Lotte affiliates to invest in South Korea.

The Lotte Hotel has served as major stakeholders in the Seoul- based group's affiliates with more than 400 circular or cross shareholdings between the units.

The chairman promised to reduce the stakes of Japan-based affiliates in the Lotte Hotel by listing the hotel chain operator and drawing up comprehensive measures to improve its corporate governance structure.

He also apologized for the brawl with his brother Shin Dong-joo, the founder's first son, for management control of the group. News about the corporate fratricide between the two sons of the founder have made the headlines in the past two weeks.

The Lotte Holdings in Japan was set to hold a shareholders' meeting next Monday to decide who would succeed the founder, but the siblings squabble was expected to continue in the court even after next week's meeting. Endi