South Korea’s Hotel Lotte Co. Ltd. plans a share sale worth up to 5.7 trillion won ($4.85 billion) next month, sources said on Wednesday, in what would be the world’s biggest initial public offering since late 2015.
The sprawling Lotte Group said last year it would list Hotel Lotte, which includes the third-largest global duty-free retail chain, as part of efforts to simplify its ownership structure amid a family feud over leadership succession.
The listing would headline what could be a bumper year for South Korean IPOs, fueled by a rise in the share market and as conglomerates that dominate Asia’s fourth-largest economy restructure.
About 86 percent of Hotel Lotte’s revenue in the January-March quarter came from its duty-free business, according to a company filing.
However, competition in South Korea’s tax-free shopping industry — the world’s biggest — is intensifying, and Lotte is poised to lose the license on its second-largest store, in Seoul, when it expires at the end of June.
Two Seoul-based fund managers said institutional investors were likely to buy at least some of the listing shares due to the massive offer size, although duty-free uncertainties may weigh on sentiment. They declined to be identified before the IPO filing document is available.
Last month, South Korea said it would issue four more duty-free store licenses in Seoul, taking the number of stores to 13 by the end of 2016 from six a year earlier. While that could enable Lotte to replace its expiring license, it intensifies competition.
Hotel Lotte plans to use its IPO proceeds to expand its global business, including hotels, with acquisitions a possibility, a group spokesman said, declining to give details or to confirm the listing details. Last year, Hotel Lotte paid $805 million for the New York Palace Hotel.
Preliminary plans call for shareholders to sell about 13.65 million shares, or a 10 percent post-listing stake, while 34.2 million new shares, a 25 percent stake, would be issued at an indicative price range of 97,000 won to 120,000 won per share, the sources said.
Raising between 4.7 trillion won and 5.7 trillion won based on the preliminary price range, the IPO could top South Korea’s previous biggest float, of Samsung Life Insurance Co. Ltd. for 4.9 trillion won in 2010. It would be the world’s biggest since Japan Post Holdings Co. Ltd. raised $5.7 billion in October 2015.
Other likely listings in South Korea this year include biotech drug contract manufacturer Samsung Biologics Co. Ltd. and construction equipment maker Doosan Bobcat Inc.
The IPO comes amid a family feud over who controls the Lotte Group, South Korea’s fifth-largest conglomerate.
Shin Dong-bin, the youngest son of 93-year-old founder Shin Kyuk-ho and CEO of the companies that are Hotel Lotte's main shareholders, cemented control of the group in August with the support of shareholders in a key Japan-based holding company. Older brother Shin Dong-joo is engaged in legal proceedings seeking to wrest control.
The feud prompted criticism of Lotte's shareholding structure, triggering a reorganization including the Hotel Lotte IPO.