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Lotte Group says to simplify structure, list hotel unit

Lotte group chairman Shin Dong-Bin bows in apology during a press conference at the Lotte hotel in Seoul on Aug 11, 2015.

[SEOUL] The Lotte Group conglomerate, wracked by a family feud over leadership succession, plans to simplify its ownership structure in an up to US$6 billion dollar revamp which includes establishing a holding company, its chairman said on Tuesday.

The decision by Shin Dong-bin to streamline South Korea's fifth largest conglomerate follows criticism by politicians and activists of its shareholding structure, which is widely considered the most complex in the country.

Lotte Group's opacity also made headlines after Shin and his brother Shin Dong-joo clashed in a bid to succeed their father, 92-year-old company founder Shin Kyuk-ho.

Dong-bin told reporters Lotte will reduce at least 80 per cent of its cross-shareholding links by year-end and eventually eliminate them.

It will also list Hotel Lotte, a business key to Lotte Group's control of its South Korean affiliates, as quickly as possible, he added. "We will emerge as a new Lotte through reform," he said.

It is not clear how long the restructuring will take but Shin Dong-bin said the total cost of adopting a holding company structure could be rise to around 7 trillion won (S$8.34 billion), equivalent to two to three years' worth of net profit for the entire conglomerate.

Politicians and activists have criticised Lotte for its opaque holding structure, which ultimate leads back to various unlisted Japanese firms that have no obligation to disclose their shareholders.

Hyundai Securities analyst Jun Yong-ki said in a report that Hotel Lotte's market valuation after an initial public offering would likely exceed 20 trillion won, citing healthy earnings growth.