[THE INVESTOR] Lotte Group affiliates have frequently purchased stocks of unlisted companies owned by the group’s owner family, including the founder Shin Kyuk-ho and his three children, since 2001, data by an online corporate tracker showed on June 19.

According to Chaebul.com, Lotte’s seven affiliates, including Hotel Lotte -- the de facto holding company of its Korea operations -- have spent a total of 224.6 billion won ($192.7 million) to purchase shares of private companies owned by the founder, Lotte chairman Shin Dong-bin, former vice chairman of Lotte Holdings in Japan Shin Dong-joo, and chairwoman of Lotte Foundation Shin Young-ja. 

Kyuk-ho sold 150.5 billion won worth of shares of his unlisted seven companies, including Lotte Corporation and Lotte Aluminum, to six listed affiliates, including Lotte Shopping, from 2001 to 2009.

From 2001 to 2003, Dong-joo and Dong-bin each sold 320,000 shares of Lotte Shopping, worth 37 billion won, to Lotteria and Lotte Corporation, respectively. Young-ja also sold 3,467 shares of Lotte Shopping to Lotteria as well in 2001.

Lotte Engineering & Construction topped the rank of listed affiliates for buying the most amount of shares from the owner family, worth 84.1 billion won. Lotte Shopping ranked second with 50.3 billion won, followed by Lotte Chemical with 29.1 billion won, Hotel Lotte with 28.5 billion won and Lotte Busan Hotel with 24.4 billion won.

“The biggest problem with Lotte Group is that the market cannot evaluate the company due to too many unlisted affiliates and lack of corporate governance,” an industry insider was quoted as saying.

“In effect, Lotte’s Korean operation is governed by unlisted Lotte Holdings in Japan. Lotte Holdings is the largest shareholder of Hotel Lotte, the owner of Korea’s Lotte, with 19.07 percent. That’s why Dong-bin and Dong-joo are keen on the upcoming shareholders meeting of Lotte Holdings in Tokyo.”

By Ahn Sung-mi (sahn@heraldcorp.com)