SEOUL: Seoul prosecution investigators raided Lotte Group and several affiliates of South Korea’s fifth-largest conglomerate on Friday, casting further shadows over an IPO for its hotel unit billed as the world’s biggest this year.
Hotel Lotte, one of the affiliates raided, this week delayed its listing and cut the size of the deal after the emergence last week of a bribery probe. The offering is expected to be worth up to US$4.6 billion
About 200 Seoul prosecution investigators were searching 17 locations including group headquarters, seven affiliate companies and the homes of key executives including Lotte Group Chairman Shin Dong-bin, local news agency Yonhap reported, citing the Seoul Central Prosecutor’s office.
Three people with direct knowledge of the matter told Reuters that the raid was part of an investigation into a possible slush fund. They declined to be identified.
One person said prosecutors were also looking into possible breach of trust related to asset transactions among affiliates.
The Seoul Central Prosecutors’ Office declined to comment.
Lotte Group declined to comment on the reason for the raid, when asked whether it concerned a possible slush fund.
A person working on the IPO who declined to be identified said bankers were awaiting further information.
“It complicates things considerably, of course,” the person said.
“We don’t know what they were looking for, what they took.”
The Lotte Group has had a turbulent recent history.
Last year it was embroiled in a bitter and highly public succession feud that drew widespread public criticism, and Hotel Lotte’s IPO had been intended to bring transparency and improve corporate governance at a group whose ownership structure is convoluted even by South Korea’s complex standards.
Shin Dong-bin, the younger son of the group’s founder, prevailed over his older brother to head the group.
“Lotte will likely delay the IPO a bit further and wait for the public outcry to die down a bit,” said Park Ju-gun of corporate analysis firm CEO Score.
“Shin Dong-bin needs to do the IPO because of not only his promise last year but also because Lotte Group continues to expand and needs to raise money from the outside,” Park said.