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Lotte Rent-a-Car Seoul Station Branch (Photo = Lotte Rental) |
[Alpha Biz= Kim Jisun] VIP Asset Management, a minority shareholder of Lotte Rental, has publicly opposed the company’s planned third-party rights offering, warning that it poses a serious threat to shareholder rights and calling for its withdrawal.
In a shareholder letter released on July 16, VIP Asset Management—which holds approximately 4% of Lotte Rental—raised concerns over the issuance of new shares to private equity firm Affinity Equity Partners, which acquired Lotte Rental from the Lotte Group in March for KRW 1.6 trillion.
According to VIP, upon completion of the rights offering, Affinity's stake would increase from 56.2% to 63.5%. Combined with shares still held by Lotte affiliates, the effective control would rise to 67.7%, surpassing the two-thirds threshold needed for special resolutions at shareholder meetings.
“This would allow Affinity and Lotte to potentially delist Lotte Rental through a ‘cash-out merger’ or comprehensive share exchange, forcibly squeezing out minority shareholders,” VIP stated. The letter further highlighted precedent: “Affinity took a similar path in the delisting of Lock&Lock, forcibly buying out minority shareholders at just KRW 8,750 per share—less than 75% of the company’s liquidation value (KRW 11,685).”
VIP called on Lotte Rental’s outside directors to fulfill their fiduciary duty under the amended Commercial Act—which was passed by Korea’s Cabinet on July 15—stating that directors must act not only in the company’s interest but in the interest of all shareholders.
Kim Min-guk, CEO of VIP Asset Management, warned that “if the board pushes through this issuance, the market will conclude that even legal reforms cannot change entrenched practices. It is time for the outside directors to demonstrate the courage to protect shareholder value.”
The Korea Corporate Governance Forum also issued a statement criticizing the transaction as a clear case of conflict of interest between controlling and minority shareholders. “The KRW 77,115 per-share price Affinity paid for Lotte Rental shares—162% higher than the market price at the time (KRW 29,400)—includes a substantial control premium that should have been extended to all shareholders through a public tender offer,” it noted.
“General shareholders were denied that opportunity, and now face significant dilution. Meanwhile, Affinity is positioned to acquire a large volume of new shares at a low price, effectively lowering its average purchase cost and increasing its stake,” the forum added.
AlphaBIZ Kim Jisun(stockmk2020@alphabiz.co.kr)
