VIP Asset Management demanded the withdrawal of the third-party allocation paid-in capital increase promoted by LOTTE Rental, claiming it could lead to the exclusion of minority shareholders through a voluntary delisting.
VIP Asset Management publicly released a shareholder letter containing this information on the 16th. VIP Asset Management owns approximately 4% of LOTTE Rental's equity.
In February, the largest shareholders of LOTTE Rental, Hotel LOTTE and Busan LOTTE Hotel, decided to sell their 56.2% stake to the private equity firm Affinity Equity Partners for 1.5729 trillion won. The sale price per share exceeded 77,115 won, more than double the previous stock price.
At the same time, LOTTE Rental decided to conduct a third-party allocation paid-in capital increase, issuing new shares to Affinity at 29,180 won per share (totaling 211.9 billion won). VIP Asset Management has claimed that this paid-in capital increase is a transaction connected to Affinity buying the largest shareholder's shares at an inflated price.
VIP Asset Management pointed out that especially if the paid-in capital increase is completed, Affinity's equity stake would increase from 56.2% to 63.5%, and when combined with the stakes of LOTTE Group affiliates, it would exceed 67.7%, allowing them to pass special resolutions at the shareholders' meeting. According to the Commercial Act, a controlling shareholder can purchase the shares of minority shareholders if they secure the equity necessary for a special resolution.
VIP Asset Management noted that if "Affinity secures the quorum for special resolutions, it will also become possible to forcibly exclude minority shareholders through a 'cash distribution type comprehensive stock exchange' and push for delisting," saying this was "the method actually used by Affinity in the recent process of delisting Lock & Lock."
VIP Asset Management urged the outside directors to take action and make a decision. Kim Min-guk, the CEO of VIP Asset Management, said, "We have tried to seek a reasonable solution through discussions with the outside directors, but the company has not even accepted requests for meetings with outside directors," adding, "Now is the time for each director to recognize their fiduciary duties and prove their responsibilities through actions."
Kim mentioned, "If this paid-in capital increase is pushed through as it is, each director cannot be free from legal responsibility, and it will be difficult to avoid criticism from shareholders and the market."