Monday, January 30, 2006

Korean IPO for Lotte

This week conglomerate retail giant Lotte Shopping will launch an initial public offering (IPO). One result of the IPO is that Lotte Group vice chairman Shin Dong-bin may overtake Samsung Group chairman Lee Kun-hee and emerge as the second biggest holder of its listed stocks.

With the IPO price of Lotte Shopping shares fixed at an unprecedented $40 per share, the market capitalization of the retail giant is expected to top 11.4 trillion won, greater than the 9.37 trillion won of its domestic archrival Shinsaege.

When Lotte’s stock starts trading in London on Feb. 8 and in Seoul the following day, Shin, 50, Lotte Group chairman Shin Kyuk-ho’s second-eldest son, will instantly race up the ladder to be No. 3 after Hyundai Automotive Group chairman Chung Mong-koo and Samsung Group’s chairman Lee.

As of last Friday, Chung, currently the richest stock investor in Korea, held more than 2.63 trillion won of shares in Hyundai Motor and other affiliated firms, including Hyundai Mobis, INI Steel and Hyundai Hysco.

Lee trails Chung whose stake in Samsung Electronics and other Samsung affiliates amounts to 2.1 trillion won, as of last Friday. The difference in total worth of stock equities held by Lee and Shin is 250 billion won.

With Shin’s shareholding in Lotte Shopping expected to reach 4.28 million after the IPO, the total worth of Shin’s equity would balloon to 1.69 trillion won. This is assuming the opening price of the retail giant’s shares remain on par with the initial offering price of 400,000 won a share,

As Shin also retains a total 160 billion won worth of shares in other subsidiaries, including Lotte Confectionery, Lotte Chilsung Beverage and Lotte Samkang, the gross value of his stock amounts to 1.85 trillion won.

Local securities analysts say there’s an ample chance for Shin to override Lee as the nation’s second-richest stock investor, taking into account that the opening price of newly listed firms generally settles between 90 percent and 200 percent.

Although stock market experts note the possibility of Shin outstripping Chung cannot be ruled out, as the opening price of Lotte Shopping could be doubled the IPO price, the market is unlikely to see such development.

Lee could also be pushed to fourth slot in the list of Korea’s top stock asset owners by Shin Dong-ju, Lotte Group chairman Shin Kyuk-ho’s eldest son and executive vice president of Lotte in Japan, and who holds 4.27 million shares in Lotte Shopping.

Why and IPO...
The IPO would serve as a stepping stone for Lotte to raise funds required to grow into a global retail group, making inroads into overseas retail markets such as Russia and India and bolstering the discount chain outlet business, Park said.

As Park noted, Lotte plans to open six new department stores, including one in Russia, by 2010, and 28 discount outlets by 2007. The retailer has earmarked 571 billion won this year to buy plots for new discount outlets and to repay debt.

Before the scheduled public offering, Shin Dong-bin held a 21.19 percent stake in Lotte Shopping.

Shin Dong-ju owned a 21.18 percent stake. Lotte Hotel had a 13.49 percent stake in its sister shopping-mall operator. Listed Lotte Confectionery owned 12.37 percent. Fuji Film owned 12.37 percent, and Lotte Chilsung Beverage owned 6.19 percent.

In 1948, Shin Kyuk-ho founded Lotte Group in Japan as a bubble gum maker.

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