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Lawsuit, union stand in way of Lotte Card deal

May 14,2019
The 1.4-trillion-won ($1.2 billion) sale of Lotte Card, Lotte Group’s card affiliate, is facing growing headwinds due to an ongoing lawsuit and labor union protests.

Hahn & Company, a local investment company, was selected as the preferred bidder of the retail giant’s credit card business earlier this month.

After the announcement, it was revealed that Hahn Sang-won, CEO of Hahn & Company, is accused of tax evasion.

The plaintiff is a labor union of mobile carrier KT and a civic group that filed a complaint with the prosecution in March.

They said that CEO of the private equity firm failed to pay a gift tax in full for the selling of a marketing firm owned by Hahn & Company to KT affiliate Nasmedia in 2016.

The sale itself was conducted based on a bloated valuation, the labor union claims.

But Hahn & Company said that the deal was carried out in accordance with the law.

"Under any legal or tax opinion, it is undoubtedly clear that neither tax valuation guideline nor gift tax has any relevance to any M&A transactions between unaffiliated companies. Nonetheless, Hahn & Company made all the required tax payments incurred as a result of the NSM transaction in accordance with the relevant tax laws."

If convicted, it could be tough for the Lotte Card deal to pass the screening procedure conducted by the country’s financial regulators, the Financial Supervisory Service and Financial Services Commission.

The law bans a company with a record of being fined because of financial irregularities from becoming an owner of a financial firm.

The Lotte Card labor union also expressed its discontent over the potential buyer over concerns that the private equity firm will hurt job security.

“Hahn & Company has no experience running a financial company and no proven track record of corporate management,” said the labor union in a statement on the card company’s internal network.


BY PARK EUN-JEE [park.eunjee@joongang.co.kr]