VIP Asset Management: "Lotte Rental Must Conduct Rights Offering at or Above Public Offering Price"

"Hotel Lotte Supplying Necessary Funds" Proposed as an Alternative
Affinity Also Urged to Clarify Stance on "Unfair Merger and Delisting"

VIP Asset Management, which has been demanding the withdrawal of Lotte Rental's rights offering plan, has called on Hotel Lotte?the entity set to receive the sale proceeds?to either provide the necessary funds for Lotte Rental or revise the rights offering plan so that the issue price is at or above the public offering price. This move comes after Oh Ki-hyung, chairman of the "KOSPI 5000 Special Committee," emphasized the urgency of amending the Commercial Act and directly mentioned the Lotte Rental case at the committee's inaugural ceremony at the National Assembly on June 23, drawing attention to future developments.

VIP Asset Management vs. Lotte Rental: Drawing a Line

Earlier, in February of this year, Lotte Rental's board of directors resolved to carry out a third-party allotment rights offering concurrently with the sale of shares by the major shareholder. At that time, Hotel Lotte and others sold their 56% stake in Lotte Rental to private equity fund Affinity Equity Partners (hereafter Affinity) at 77,115 won per share?2.6 times the then-current share price of 29,400 won. Simultaneously, they decided to issue new shares to Affinity via a third-party allotment at 29,180 won per share. The rights offering was scheduled to proceed after the Fair Trade Commission's business combination review.

In response, earlier this month, VIP Asset Management publicly requested that Lotte Rental withdraw the rights offering, stating, "Affinity has received two benefits: an increase in its stake and a decrease in its average purchase price, while existing general shareholders are left to bear losses from equity dilution." However, Lotte Rental stated in its securities registration statement disclosed on June 23 that "there are currently no plans to withdraw the rights offering."

Recently, Lotte Rental's share price has remained sluggish due to concerns over approximately 20% equity dilution from the rights offering and the potential for delisting through a merger with SK Rent-a-Car. Kim Minkook, CEO of VIP Asset Management, emphasized, "The acquirer must clarify its position on issues such as the possibility of an unfair merger and delisting following Affinity's acquisition, as well as whether the value-up policy will continue."

Opposition among minority shareholders regarding Lotte Rental's rights offering is also spreading, particularly on online communities. Regarding this, CEO Kim suggested an alternative: "Lotte Rental has sufficient cash and additional borrowing capacity, so a rights offering is unnecessary. However, if funds are needed for early bond redemption or other reasons, Hotel Lotte?which caused the situation and stands to benefit the most?should directly provide the funds, or at the very least, the rights offering should be conducted at a price no lower than the public offering price of 59,000 won."

Potential Violation of 'Duty of Loyalty to Shareholders' in Commercial Act Amendment

Recently, Oh Ki-hyung, a Democratic Party lawmaker and chairman of the "KOSPI 5000 Special Committee" within the Democratic Party, stated in a media interview, "There is absolutely no reason to lower the level of the Commercial Act amendment or to slow down its progress," citing the Lotte Rental rights offering as an example. As a result, if Lotte Rental proceeds with the rights offering as planned after the Commercial Act is amended, there is a possibility that lawsuits may be filed over violations of the 'duty of loyalty to shareholders.'

Legal experts point to the U.S. state of Delaware as the jurisdiction where the legal principle of the duty of loyalty to shareholders is most systematically established. There are numerous precedents in which damages have been awarded when certain shareholders benefited at the expense of others. A representative case is the 2010 Orchard case involving the U.S. digital music distribution company. At that time, the major shareholder attempted to forcibly purchase minority shareholders' stakes, and the board of directors under its control approved the transaction at a low price without independent review. The Delaware court recognized this as a violation of the duty of loyalty and ordered the major shareholder to compensate general shareholders for the difference, ruling that the purchase price was unfairly low.

CEO Kim Minkook added, "With the Commercial Act amendment approaching, I hope the Lotte Rental rights offering issue will be resolved in a way that considers and respects general investors, so that it can become a win-win case without any significant legal disputes."