Investigation Forces Hotel Lotte Co. to Postpone IPO
PHOTO: Seoul, South Korea, where Hotel Lotte Co's headquarters are located. (Photo courtesy of Korea Tourism Organization).
An investigation into South Korea's Lotte Group has prompted the group's Hotel Lotte Co. to postpone its initial public offering, the Wall Street Journal reported.
The group's Seoul headquarters were raided Friday amid a probe into alleged slush funds.
The blow is a huge one considering the IPO was poised to raise an estimated $4.5 billion. For perspective, that figure would have been the world's highest for 2016.
Reuters reported that Hotel Lotte Co. had designated approximately $1.45 billion of its IPO proceeds to expand its duty free operations overseas. But as a result of the indefinite postponement the company's expansion efforts are likely to be stalled.
The money also would have been used to spur the company's hotel expansion.
In a statement issued over the weekend, Lotte said it will cooperate with the investigation but will face a sizable challenge in meeting next month's deadline to complete the IPO.
Daishin Securities Co.'s director of governance research department Kim Ho Joon told Bloomberg that the "crisis can be viewed as a problem of governance and lack of transparency at Lotte Group."
While it remains to be seen how long the IPO will be put on hold, a banking expert told the Journal it's likely "to take some time."
Currently, there are just under two dozen Lotte hotels located across five different countries.
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