By Jhoo Dong-chan
Hahn & Company, which was selected as a preferred bidder for Lotte Card, hit an unexpected snag as the CEO of the nation's second-largest private equity firm (PEF) is facing a complaint.
Union workers of mobile carrier KT and civic group Vampire Capital Hunter jointly accused KT Chairman Hwang Chang-gyu and the company executives of breach of trust at the Seoul Central District Prosecutor's Office in March.
In October 2016, CEO Hwang and company executives allegedly allowed the mobile carrier to acquire then N Search Marketing for 60 billion won ($50.6 million). N Search Marketing was Hahn & Company's business portfolio unit.
Hahn & Company immediately denied the allegation.
"The complaints KT's labor union has filed against one of our fund companies are completely groundless and without merit. They contend that an inheritance tax should have been used which is not the case under any tax or commercial laws as inheritance tax is only for those who are related parties," a company official said.
"Hahn & Company is not in any way a related party of KT or its management. The valuation was supported by an independent accounting firm which is publicly disclosed, and the required taxes were paid three years ago. There are currently no charges or litigation on this matter and we expect that the Korean prosecutors will review this complaint and concur."
The prosecution launched an investigation by taking testimonies from the union workers, May 8.
"The Financial Supervisory Service (FSS) will look into whether Hahn & Company is qualified for acquiring its credit card unit," an FSS official said. "The screening will be suspended before a court ruling."
Under related laws, major shareholders should not be subject to punishment heavier than a monetary penalty for violating the fair trade act, tax and special economic laws over the past five years.
The FSS also allows them to become a major shareholder if the offense is considered minor.
"If they are subject to a legal punishment heavier than just a monetary one, they won't be able to acquire Lotte Card," the FSS official said.
Hahn & Company surprised the market by being selected as a preferred bidder for the card company earlier this month.
The PEF reportedly valued the company at roughly 1.8 trillion won, and said it is willing to acquire an 80 percent stake in Lotte Card.
Lotte Group's announcement came as a surprise because either Hana or Woori would take control of the company to strengthen their credit card business in their race to ramp up assets.
Subscribe
E-Paper
