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Surprise arrest of Lotte Chairman creates leadership vacuum, shares down

Shin Dong-bin's detention is expected to hamper both Lotte's investment plans and efforts to streamline, that were aimed at offsetting losses in China

Reuters  |  SEOUL 

Lotte chief gets suspended prison term; I apologise to public, says he
Lotte. Photo: Reuters

The shock arrest of the head of South Korea's for bribery sent shares in group firms plunging on Wednesday as investors fretted about a leadership vacuum at a challenging time for the country's fifth-largest conglomerate.

The Central Court on Tuesday sentenced Group Chairman to two years and six months in prison in a case tied to an influence-peddling scandal that has rocked the country's business and political elite.

Shin had widely been expected to get a suspended sentence at most.

His detention is expected to hamper both Lotte's investment plans and efforts to streamline, that were aimed at offsetting losses in China.

It also leaves the door open for a family feud to reignite, analysts said.

"Group is currently in flux. It's businesses are mainly domestic.

Shin has attempted to expand overseas by growing its chemical business and in Asia, but that is expected to grind to a halt - at least until the appeals ruling," said Park Ju-gun,

Shares in Corp, the holding company of Group, tumbled more than 7 percent to its lowest in almost eight weeks, while flagship retailer Shopping slid 5.5 percent, marking its lowest point since early January.

Group said after Shin's arrest on Tuesday it will begin "emergency operations" to "put the minds of stakeholders at rest". Analysts have said they expect Hwang Kag-gyu, the of the South Korean holding company, to take a leading role but that major decisions are likely to be put on hold.

Shin's appeals trial is expected to take months.

had been in the process of tranferring control of various units to Corp after it debuted in late last year, but analysts said the work is partly done, as Corp does not control Chemical and key unit Hotel

Group expressed concern on Tuesday that Shin's arrest could hinder plans to list Hotel

Group has sought a fresh opportunity to list Hotel after a planned $4.5 billion IPO was scuppered in 2016.

also planned this year to expand its presence in overseas markets such as and Indonesia, since units sustained losses in China, where it was forced to close stores as business suffered following "fire inspections" that were ordered after a US missile defense system was deployed in on land provided by

First Published: Wed, February 14 2018. 12:24 IST