This article was published on March 25, 2025, at 2:31 p.m. on the ChosunBiz MoneyMove site.
LOTTE Group's logistics subsidiary, LOTTE Global Logistics, has confirmed that the amount it needs to pay to financial investors (FIs) has reached 300 billion won due to a significant reduction in corporate value during the initial public offering (IPO) process on the stock market. The reason corporations go public is to raise new funds for company growth, but it appears that more money is going out than coming in through new shares.
On the 25th, according to sources in the investment banking (IB) industry, LOTTE Global Logistics submitted a securities registration statement to the Financial Services Commission the previous day and commenced the public offering process for listing on the securities market (KOSPI). The public offering price range proposed by LOTTE Global Logistics is between 11,500 and 13,500 won. The expected market capitalization after the listing is between 478.9 billion and 562.2 billion won. Samsung Securities and Korea Investment & Securities are the lead underwriters, with KB Securities serving as a co-underwriter.
The underwriting syndicate created a public offering structure where the total number of shares offered is 14,944,322, with new shares and existing shares accounting for 7,472,161 shares (50%) each. The portion of existing shares sold comes from the 21.87% stake held by LLH, a limited liability company founded by the financial investor (FI) H Private Equity. LLH invested 286 billion won in LOTTE Global Logistics in 2017.
At that time, LOTTE Group entered into a put option contract to compensate for the difference if the public offering price was lower than the acquisition price per share for LLH. According to the contract among shareholders, it stipulates that 'if the final price of the existing shares sold, determined based on the demand forecast for the initial public offering, falls below the exercise price per share, the difference between the exercise price per share and the final sale price must be paid within 30 days of receiving the sale proceeds.'
As a result, the market predicts that LOTTE Global Logistics will attempt to go public with a valuation in the mid-1 trillion won range. However, by significantly lowering the public offering price to around 500 billion won, the amount it needs to pay to LLH has increased compared to initial expectations. LOTTE Global Logistics was valued at around 900 billion won when receiving investments from LLH.
Specifically, the average acquisition price per share of LOTTE Global Logistics held by LLH, including the cost of bridge loan financing, is about 38,250 won per share. The internal rate of return (IRR) guaranteed by LOTTE Group must also be added. From April 13, 2017, to April 12, 2021, it is a compound annual rate of 3.0%, from April 13, 2021, to April 12, 2023, it is 3.5%, and after April 13, 2023, it is the average bond yield from five private bond rating companies plus 1.3%.
Accordingly, the calculated exercise price of the put option for LLH is about 50,720 won per share. Based on the lower end of the band at 11,500 won, the difference is about 293.1 billion won. This is more than three times the amount that LOTTE Global Logistics is expected to raise through the issuance of new shares, approximately 84.8 billion won. This amount was calculated considering the schedules for the demand forecast for institutional investors and the public offering subscription for individual investors, and it is expected that the listing on the securities market will occur in May. If the final listing date is pushed beyond May, an additional amount will be incurred.
However, LOTTE Group stated that there is no concern about the outflow of funds from LOTTE Global Logistics. The parties to the execution of the shareholder agreement were transferred from the LOTTE Group affiliates (LOTTE Chemical, Lotteria, LOTTE Logistics, LOTTE Food, Lotte Shopping, LOTTE Confectionery, LOTTE Chilsung Beverage) at that time to LOTTE Corporation and LOTTE Hotel. A company official noted, 'During the absorption merger process with LOTTE Logistics, LOTTE Corporation and LOTTE Hotel inherited the obligations of the shareholder agreement,' adding, 'Therefore, there will be no impact on the financial status of LOTTE Global Logistics.'