Lotte Rental Minority Shareholders Petition Against Paid-In Capital Increase, Citing "Preferential Treatment for Major Shareholder and Private Equity Fund"

The controversy surrounding Lotte Rental's third-party allotment paid-in capital increase is intensifying. Following a public protest by VIP Asset Management, which holds about 4% of the shares, minority shareholders have now submitted a petition to the Office of the President and the Fair Trade Commission.

According to shareholder rights platform ACT on July 23, the Lotte Rental Minority Shareholders' Alliance (1,206 members, holding a combined 1.76% stake), which was organized through ACT, stated in its petition, "This paid-in capital increase provides preferential treatment only to the previous controlling shareholder, Lotte Group, and the new acquirer, private equity fund Affinity Equity Partners (Affinity), while minority shareholders are left to bear the damage of share dilution and a decline in stock price. This constitutes an unfair transaction."

This controversy originated in February, when Lotte Group sold a 56.2% stake in Lotte Rental to Affinity for 1.6 trillion won. At the time, the sale price was 77,115 won per share, which included a management premium of about 262% over the then-market price. Simultaneously, Lotte Rental decided to issue new shares worth 212 billion won through a paid-in capital increase, to be allotted to Affinity. However, the allotment price for these new shares was set at only 29,180 won per share. Minority shareholders argue that this price is much lower than the sale price, allowing Affinity to acquire a larger stake at a bargain, which they claim is an unfair measure.

The minority shareholders' alliance stated, "Lotte Rental holds 450 billion won in cash and has an A+ credit rating, so it is questionable whether a paid-in capital increase is even necessary for large-scale fundraising. Since this is a transaction with a distorted structure that only reflects the interests of the major shareholder and the private equity fund, the paid-in capital increase should be withdrawn, and an open tender offer in which all shareholders can participate equally should be discussed." The open tender offer they are demanding refers to a measure in which the company buys shares at a fair price, allowing shareholders other than Lotte Group to also receive a management premium.

Previously, VIP Asset Management also demanded the cancellation of the plan in a shareholder letter this month, stating that the paid-in capital increase poses a significant risk of infringing on shareholder rights. VIP Asset Management asserted, "Now is the time for each director to recognize their fiduciary duty and prove their responsibility through action," and called on Lotte Rental's outside directors to make a courageous choice to protect shareholder value.