The former vice chairman of Lotte is attempting to halt Lotte Chairman Shin Dong-bin‘s efforts to create a Korean holding company of the group, according to law firm Barun Law on Monday.

The firm, which represents former Vice Chairman Shin Dong-joo’s SDJ Corporation, said that it had filed for an injunction with the Seoul Central District Court to prevent four Lotte companies from merging their investment entities to create a central holding company. 

According to Chairman Shin Dong-bin's plans to increase transparency at his company, the boards of Lotte Food, Lotte Shopping, Lotte Confectionery and Lotte Chilsung Beverage voted in late April to each split into investment and business entities, then to merge the investment entities together under Lotte Confectionery.

The decision is set to be approved by shareholders in August.

According to Barun Law, the intrinsic value of Lotte Shopping’s investment entity is inflated under the current plan. Lotte Group filed a disclosure that said that it would buy back shares of Lotte Shopping from shareholders who disapproved of the merger at 231,404 won ($207) per share, just 27 percent of the company‘s intrinsic value of 864,374 won.

SDJ Corporation’s claim is that this false inflation will allow Lotte Shopping‘s shareholders to gain an “unfairly” large stake in the merged holding company at the expense of shareholders in the other three companies, according to Barun Law in the injunction application.

Lotte Group responded Monday through a statement that the proposed plan to transition to a holding company structure had been “double and triple-checked” by independent entities, and that it was designed to “realize management that would benefit shareholders.”

Lotte Group said that it would take legal measures to fight “any efforts to interfere with the shift to a holding company by creating confusion.”

The move by SDJ Corporation would interfere with Shin Dong-bin’s creation of a holding company structure that would streamline control over the conglomerate‘s affiliates. The filing comes as Shin Dong-joo prepares to ask the shareholders of Lotte Holdings, the group’s holding company in Japan, to reinstate him as a member of the board at a shareholders‘ meeting next month.

After being ousted by his younger brother from the company’s leadership, Shin Dong-joo has consistently claimed that management of the group was unstable under Shin Dong-bin. His claims have grown more vocal as Shin Dong-bin was accused by prosecutors of having bribed former president Park Geun-hye for the reinstatement of a duty-free operating license for Lotte Duty Free.

Earlier this month, the board of Lotte Holdings agreed to maintain the “current management structure” of Lotte, meaning that they resolved to keep Chairman Shin Dong-bin in power, supporting the chairman‘s moves to change the structure of the company in Korea. 

By Won Ho-jung (hjwon@heraldcorp.com)