Lotte Confectionery Co. will likely to serve as an intermediate holding company for Lotte Group’s food business in the course of the group’s transformation in ownership structure after the company’s stock split designed to attract more investors.

Lotte Confectionery owns stakes in multiple sister companies: Lotte Shopping (7.86 percent) Lotte Chilsung (19.29 percent), Lotte Food (9.32 percent) and Lotteria (13.59 percent). For this reason, experts have forecast that Lotte Confectionery would be merged into Hotel Lotte or separated into a holding company and an operating company to merge the holding company into Hotel Lotte after the conglomerate terminates cross-shareholding and prepare for a holding company system around the hotel business after Hotel Lotte goes public.

However, the latest analysis on the conglomerate’s ownership structure suggests that Lotte Confectionery would be an intermediate holding company under Hotel Lotte to control the group’s food business as Hotel Lotte can be a holding company even without being combined with Lotte Shopping or Lotte Confectionery.

According to the analysis, Hotel Lotte could increase its stake in key affiliates like Lotte Shopping and Lotte Confectionery to more than 40 percent if smaller affiliates such as Lotte Aluminium that holds a 15.3 percent stake in Lotte Confectionery, Korea Fujifilm with a 7.9 percent stake in Lotte Shopping and Lotte Corporation with a 31.3 percent stake in Lotte Chemical are merged together and an equity swap deal is done with Daehong Communications and Lotte Engineering & Construction.

Lotte Confectionery could also hike its stake in Lotte Food and Lotte Chilsung to more than 30 percent if it hands over most of its stake in Lotte Shopping to Hotel Lotte in return for Hotel Lotte’s stake in Lotte Food (8.9 percent) and Lotte Chilsung (14.8 percent).

Whatever happens, Lotte Confectionery will be in a spotlight for its ownership in other affiliates in the course of efforts to eliminate the group’s cross-shareholding, said Lee Sang-heon, an analyst at HI Investment & Securities.

Lotte Confectionery shares extended its winning streak for four straight sessions on Wednesday, jumping 9.4 percent to 2,806,000 won on news that it plans a 10-for-1 stock split in May.

By Noh Hyun

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