April 26, 2017 / 8:19 AM / 3 years ago

UPDATE 2-Lotte Group's holding firm to lift governance, may boost chairman's control

* Revamp will reduce cross shareholding ties to 18 from 67

* Expected to lift control of chairman Shin Dong-bin-analysts (Adds analysts’ comments, context)

By Joyce Lee

SEOUL, April 26 (Reuters) - South Korea’s Lotte Group said it is setting up a holding company by restructuring the conglomerate’s four listed units to boost operational transparency, a move analysts say could enhance its chairman’s control amid a power struggle with his brother.

The country’s fifth-biggest conglomerate has been under pressure to resolve its complex structure and improve governance after a public feud between founding family members that began in 2015 and has pitted Chairman Shin Dong-bin against elder brother Shin Dong-joo.

Under the plan unveiled on Wednesday, retailer Lotte Shopping, Lotte Confectionery, Lotte Chilsung Beverage and Lotte Food will each split into two companies, the firms said in filings. Half of the resulting eight firms will then be combined into one holding company.

The setup of the holding company will reduce cross-shareholding ties to 18 from 67 currently, Lotte Group said in a statement. Shares of the new entities will begin trading on Oct. 30 after shareholder approval, it added.

The set-up of the holding company is a chance for better valuations for the remaining businesses as the split will make it easier to estimate their operational worth, analysts said.

They also said that the reorganisation starts a process for Lotte Group chairman Shin Dong-bin to strengthen control of the group, as his own stake and friendly stakes in the holding company is expected to outweigh that of his feuding brother.

“The ownership reorganization has an element of strengthening the owner family’s control, but it really touches on the effective allocation of resources,” wrote analysts Yoon Tae-ho and Yeo Yeong-sang of Korea Investment & Securities in a note this week.

A Lotte Group spokeswoman declined to comment on the analysts’ views.

Both brothers are currently on trial on charges including embezzlement, while Shin Dong-bin was freshly charged in April with bribery in the graft scandal that ousted former president Park Geun-hye.

Both have denied wrongdoing.

Lotte had pursued a $4.5 billion initial public offering of Hotel Lotte last year as part of its plan to resolve cross-shareholdings before it was scuppered.

Lotte Group maintains it will revive the IPO but has not set a concrete date. (Reporting by Joyce Lee; Editing by Randy Fabi and Muralikumar Anantharaman)

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