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 The sprawling Lotte Group said last year it would list Hotel Lotte,
which includes the third-largest global duty-free retail chain, as
part of efforts to simplify its ownership structure amid a family
feud over leadership succession.
The listing would headline what could be a bumper year for South
Korean IPOs, fueled by a rise in the share market and as
conglomerates that dominate Asia's fourth-largest economy
restructure.
About 86 percent of Hotel Lotte's revenue in the January-March
quarter came from its duty-free business, according to a company
filing.
However, competition in South Korea's tax-free shopping industry -
the world's biggest - is intensifying, and Lotte is poised to lose
the license on its second-largest store, in Seoul, when it expires
at the end of June.
Two Seoul-based fund managers said institutional investors were
likely to buy at least some of the listing shares due to the massive
offer size, although duty-free uncertainties may weigh on sentiment.
They declined to be identified before the IPO filing document is
available.
Last month, South Korea said it would issue four more duty-free
store licenses in Seoul, taking the number of stores to 13 by the
end of 2016 from six a year earlier. While that could enable Lotte
to replace its expiring license, it intensifies competition.
FAMILY FEUD
Hotel Lotte plans to use its IPO proceeds to expand its global
business, including hotels, with acquisitions a possibility, a group
spokesman said, declining to give details or to confirm the listing
details. Last year, Hotel Lotte paid $805 million for the New York
Palace hotel.
Preliminary plans call for shareholders to sell about 13.65 million
shares, or a 10 percent post-listing stake, while 34.2 million new
shares, a 25 percent stake, would be issued at an indicative price
range of 97,000 won to 120,000 won per share, the sources said.
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Raising between 4.7 trillion won and 5.7 trillion won based on the
preliminary price range, the IPO could top South Korea's previous
biggest float, of Samsung Life Insurance Co Ltd for 4.9
trillion won in 2010. It would be the world's biggest since Japan
Post Holdings Co Ltd raised $5.7 billion in October, 2015.
Other likely listings in South Korea this year include biotech drug contract
manufacturer Samsung Biologics Co Ltd and construction equipment maker Doosan
Bobcat Inc.
The IPO comes amid a family feud over who controls the Lotte Group, South
Korea's fifth-largest conglomerate.
Shin Dong-bin, the youngest son of 93-year-old founder Shin Kyuk-ho and CEO of
the companies that are Hotel Lotte's main shareholders, cemented control of the
group in August with the support of shareholders in a key Japan-based holding
company. Older brother Shin Dong-joo is engaged in legal proceedings seeking to
wrest control.
The feud prompted criticism of Lotte's shareholding structure, triggering a
reorganization including the Hotel Lotte IPO.
(Additional reporting by Elzio Barreto in HONG KONG; Editing by Tony Munroe and
Stephen Coates)
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