Hotel Lotte duty free arm defends practices amid bribery probe

SEOUL: Hotel Lotte Co Ltd’s duty free division said on Monday it chooses the products it sells “fairly and objectively”: responding to a bribery investigation that has delayed a roadshow for the South Korean company’s US$4.9 billion IPO.

Overseas investor meetings were due to begin on Monday in Hong Kong for what is slated to be the world’s biggest initial public offering this year, but people familiar with the matter said a need to disclose the investigation had caused the delay.

South Korean prosecutors raided the home of Shin Young-ja, daughter of the Lotte Group’s founder and head of the Lotte Foundation, as well as offices of Lotte’s duty free operation on Thursday.

According to domestic news agency Yonhap, prosecutors are looking into whether the company and Shin received bribes from local cosmetics company Nature Republic in exchange for store space.

The Seoul Central District Prosecutors’ office could not be reached for comment on Monday, a public holiday in South Korea.

Officials at Lotte Foundation, where Shin Young-ja serves as chairwoman, and Nature Republic, could also not immediately be reached for comment.

Lotte Duty Free, the largest division of Hotel Lotte by sales, said that Shin, 73, had stepped back from operations at the company in 2012 and was not in position to influence duty free operations.

“Lotte Duty Free will cooperate fully so that all related doubts can be cleared up through prosecutors’ current investigation,” it said in a statement sent by text message to Reuters on Monday.

It also said Nature Republic products have been in its stores since 2010, before the alleged bribery activity had taken place.


Hotel Lotte is the world’s third-largest operator of duty free retail outlets, a business that accounted for 86 percent of its first-quarter revenue.

“The problem is, duty free takes up a large portion of Hotel Lotte’s business. That important business has been connected with a scandal, and the uncertainty might drive valuations down,” said Chung Sun-sup, CEO of research firm

Foreign investors are important to the deal’s success.

Nearly two-thirds of the IPO shares will be allocated for distribution by global brokerages, with the remainder to be sold through local brokers,…

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