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(2nd LD) Hotel Lotte delays IPO to July amid bribery probe

All News 18:18 June 07, 2016

(ATTN: CHANGES headline, lead; UPDATES with more details, company response in paras 7-11)

SEOUL, June 7 (Yonhap) -- Hotel Lotte Co. said Tuesday it will postpone the proposed initial public offering (IPO) to next month and discount its offering price as senior officials have come under investigation for alleged bribery related to its duty-free business.

Lotte's hotel and duty-free unit has been preparing to list its shares on the Seoul bourse on June 29, planning a series of overseas roadshows starting from this week to attract offshore investors.

The first overseas deal roadshow slated for Monday in Hong Kong, however, was canceled after prosecutors on Thursday raided its duty-free business department in Seoul and the house of Shin Young-ja, the head of the Lotte Foundation and daughter of group founder Shin Kyuk-ho, on allegations of bribery.

The 74-year-old Shin and other company officials are suspected of receiving kickbacks from Jung Woon-ho, chief of the scandal-ridden cosmetics brand Nature Republic, in return for favorable space in Lotte's duty-free shops. Both Shin and Hotel Lotte flatly denied the allegations.

The roadshow couldn't take place as planned as Lotte must report to financial regulators and the Korea Exchange (KRX), the main bourse operator, on important changes ahead of the listing.

On Tuesday, officials from Hotel Lotte, the Financial Services Commission and IPO managers held a meeting to discuss the issue and agreed to delay the listing schedule to carry out overseas deal roadshows, book the building and other procedures.

The company said it will hold the book building sessions from July 6-7 and receive subscriptions from July 12-13 to be able to float the shares within July.

"Hotel Lotte voluntarily applied the discount rate to the price range to protect the interests of shareholders. The listing will be delayed by about three weeks to go public within July," Mirae Asset Daewoo, the lead manager for the IPO, said.

Hotel Lotte initially planned to offer 47.85 million shares at a price range of 97,000 won to 120,000 won (US$83.70-$103.50) per share, but it lowered it to 85,000-110,000 won considering the impact of the ongoing investigation into its listing.

With the adjustment, the offering is estimated to be around 4.7 trillion to 5.2 trillion won. Still, the upper price band would surpass the record amount of 4.9 trillion sale by Samsung Life Insurance Co. in 2010.

The company stressed the IPO is the "key growth strategy", noting it will push for the process to expand its duty-free business at home and abroad and beef up hotel business.

The latest development is another setback for the retail giant with subsidiaries that have been involved in irregularities. Its home shopping channel, Lotte Homeshopping, is facing the suspension of its prime time broadcasting for submitting false documents to renew its business license last year.

The listing is one of the reform pledges that Lotte Chairman Shin Dong-bin made as part of efforts to improve his group's corporate image following a bitter succession feud with his elder brother for control of the retail-focused conglomerate, which has sprawling businesses both in South Korea and Japan.

Hotel Lotte, the world's No. 3 duty-free operator, said it will use the funds to step up its duty-free business, hotel chain and theme park to offer comprehensive options to travelers. The duty-free business is the company's key source of income, accounting for 86 percent of its total sales.


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