The Lotte Group has postponed its planned $4.5bn IPO due to the adverse publicity surrounding successive raids on its Seoul offices by the Seoul Central Prosecutor’s (SCP) office.

There has been no detailed explanation for the postponement from the Lotte Group yet, although it would appear that the company and its advisors have decided that the environment is no longer conducive to a successful outcome following the events of the 11 days.

SECOND RAID BY PROSECUTOR’S OFFICE

Only last Friday the SCP extended its investigation into the Lotte Group by raiding a further 17 offices in Seoul. This followed its initial seizure of documents a week previous (June 2) when the probe appeared to be narrowly centred around Lotte’s business relationship with one of its cosmetics customers, Nature Republic.

Neither the SCP or Lotte have made any official comments on the escalation of the investigation, although Lotte apparently confirmed to Reuters News Agency a week ago (in a written statement according to the news agency) that the selection process it operates in its shops is fair to all companies and it will cooperate fully with SCP investigators.

 

As reported, the Lotte Group announced last week that it was delaying the release of its planned IPO until July, but today’s postponement appears to carry no further timetable attached for the offering, which was already reduced by around $350m to $4.5bn.

 

 

 

Any hopes Lotte may have held that this investigation would go away any time soon have now evaporated. Fears that the offer might also have been further discounted if it had gone ahead are also likely to have played a major role in Lotte’s decision.

 

At the same time, the SCP investigation appears to have become more wide ranging, with multiple Lotte company offices raided by around 200 SCP personnel last Friday – including the personal homes of leading executives.

 

 

The cost to the giant’s business as a whole was also escalating last week after its Lotte Chemical division abandoned a $3.1bn bid to buy US chemicals producer Axiall Corp, blaming the withdrawal on the group’s exposure to this investigation.

 

UNEASY FUTURE FOR WORLD TOWER ‘DUTY FREE’
Also, prior to this investigation the company had appeared to be making silent progress in its efforts to regain its important duty free licence for its prestigious Lotte World Tower duty free store in Seoul – which it lost last November.

 

As such, Lotte knows better than anyone that its six-month extension to allow for the orderly closure of this most prestigious downtown duty free business is almost up.

For further background, click here: http://www.trbusiness.com/regional-news/international/lotte-revises-4-5bn-ipo-and-delays-to-july/106100

 

Front page image: Lotte World Tower in Seoul. [Credit: Teddy Cross].