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Hotel Lotte IPO could improve corporate governance, aid overseas expansion

AnIPO of Hotel Lotte isintended to improve the corporate governance structure of Lotte Group, SouthKorea's fifth-largest conglomerate, as well as help with the hotel brand'sexpansion overseas, Choi Min-a, an analyst with Korea Investment &Securities, said in an interview.

HotelLotte hasSouth Korea's largest duty-free chain and operates morethan 20 hotels domestically and abroad. It also holds stakes in affiliates suchas Lotte Shopping Co. Ltd.and Lotte Foods.

AnIPO of the lodgingsand duty-free sales unit, planned for this summer, could constitute the country'sbiggest-ever listing,worth up to US$5 billion.

Plansto list the hotel group came soon after second son Shin Dong Bin ousted hisfather, Shin Kyuk Ho, as chairman of parent company Lotte Group in a publicfamily feud that led to calls to revamp the company's corporate structure, The Straits Times reportedin August 2015.

"Lottewas believed to be planning for the IPO of Hotel Lotte already, but the familyfeud and public pressure actually pushed that plan forward to earlier than theyhad expected," said Choi.

LotteGroup has416 cyclical shareholding structures, believed to be the most complicated inthe country, according to an August 2015 report in The Korea Herald.

Itis believed that the flotation of Hotel Lotte could eliminate some of thecomplicated cross-holdings between group businesses, allowing investors tounderstand the group's ownership structure better, according to Choi.

TheIPO is also poised to bring significant financial benefits to Hotel Lotte,which is seeking capital to expand globally, she said.

InJune 2015, the group inked a deal to buythe historic New York Palace Hotel in Manhattan for US$805 million. By 2020,Lotte Hotel aimsto acquire 20 more properties overseas and to become one of the top threerecognized hotel brands in Asia, the company said in October 2015.