Lotte Group on in-house M&A deals after its chief returns to work

South Korea’s fifth largest conglomerate Lotte Group has gotten on with in-house reorganization and M&A deals after its chief Shin Dong-bin reported back to work after an appeals court in Seoul suspended his 30-month jail sentence over bribery charges.

According to sources from the investment banking industry and business circle on Sunday, the group’s holding entity Lotte Corp. is seeking to sell its stakes in financial units including Lotte Card to raise funds to pay off short-term loans it took out to purchase stakes in Lotte Chemical. Last Wednesday, it bought a 23.24 percent stake in the chemical unit for 2.22 trillion won ($1.9 billion) from Hotel Lotte and Lotte Property & Development in an after-trading-hour block trade.

Instead of a stock swap deal to exchange its shares in financial units for Lotte Chemical shares, Lotte Corp. opted to buy shares in the chemical company to meet the stake guideline of a subsidiary under a holding structure.

The purchase came just five days after the group’s Chairman Shin returned to work upon the appeals court’s decision to suspend his 30 months jail term for four years.

Shin in February this year was sent to prison for bribery charges in an influence-peddling scandal that ousted former Korean President Park Geun-hye from office. But earlier this month, the appeals court said that Shin’s donation to an organization set up by President Park’s friend Choi Soon-sil was made passively, and it is difficult to strictly hold Shin responsible for bribe-offering under the circumstances of the time.

Following the latest stake purchase and the return of its chief, Lotte Group’s other mergers and acquisitions also would gather pace, according to an official from the group, as it needs to dispose of its stakes in financial affiliates by October 2019 under Korea’s current fair-trade law banning holding companies from owning stakes in financial firms. As of the end of June, Lotte Corp. holds a 93.78 percent stake in Lotte Card and 25.64 percent in Lotte Capital, worth more than 2 trillion won in total. Lotte Corp. will use the proceeds first to pay off the loans it took out to purchase shares in Lotte Chemical.

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