Lotte Confectionery Co., a unit of South Korean retail giant Lotte Group, said Thursday that Lotte's Japan operation became the second-largest shareholder in the affiliate, a move seen as part of efforts to cement the incumbent group chairman's grip on the conglomerate amid a succession feud.

In a regulatory filing, Lotte Confectionery said that Tokyo-based Lotte Holdings has bought 7.8 percent of its shares for 256 billion won ($218 million), or at 2.3 million won per share during trading hours, over the past 20 trading days.

Earlier this month, Lotte Holdings bought a 2.1 percent stake in Lotte Confectionery through block deals in after-hours trading.

With the latest stock purchase, Lotte Holdings' stake in the confectionery unit will rise to 9.9 percent, making it the No. 2 stakeholder after Lotte Aluminum.

Lotte Group Chairman Shin Dong-bin and his elder brother Dong-joo have been involved in a succession feud over the group that has a business portfolio from food to retail, mostly in South Korea and Japan.

The latest share purchase is interpreted as an effort to strengthen Dong-bin's grip on Lotte Confectionery, which stands at a critical position in the group's cobweb-like structure.

The confectionery unit has stakes in other key Lotte affiliates, including Lotte Shopping, Lotte Chilsung and Lotte Food, serving as a critical link in South Korea's fifth-largest conglomerate.

Shin Dong-bin also owns an 8.8 percent stake in Lotte Confectionery, followed by Shin Kyuk-ho with 6.8 percent and Shin Dong-joo with 4 percent.

Founder Shin Kyuk-ho has sided with Dong-joo, who has brought several suits against his younger brother in Japan and Korea after being fired from his senior executive position at Lotte Holdings earlier this year.

As part of an effort to improve its corporate governance, Lotte Group is seeking to list Hotel Lotte on the Seoul bourse within the first half of next year and then push for an initial public offering of Lotte's Japan operation on the Japanese stock exchange.

The IPO of Hotel Lotte is one of the reform pledges the chairman has made to assuage public disgust after the bitter family feud shed light on its complicated shareholding structure.

A Lotte representative said earlier that the hotel unit is expected to have a market capitalization of around 10 trillion won when it is publicly traded, but market watchers say losing one of its duty-free stores in Seoul in the recent duty-free license competition could lead to the re-evaluation of its market value. (Yonhap)