Fair Trade Commission Designates 64 'Publicly Disclosed Business Groups'... IMM Investment, First Case of PEF Specialized Group

Trends in the Number of Affiliates Over the Past 5 Years.

[Asia Economy Reporter Joo Sang-don] The Fair Trade Commission announced on the 3rd that it designated and notified 64 corporate groups with total assets of 5 trillion won or more as of May 1, 2020 (affiliated companies: 2,284) as publicly disclosed corporate groups.

For affiliated companies of publicly disclosed corporate groups, disclosure and reporting obligations under the Fair Trade Act and regulations on the private interests of the controlling family apply.

The number of designated groups reached the highest level since public corporate groups were excluded (in 2017), with five corporate groups newly designated as publicly disclosed corporate groups, significantly increasing the number of disclosed groups. Additionally, a new type of group was designated.

IMM Investment entered the publicly disclosed corporate groups for the first time as a private equity fund (PEF)-focused group. KG showed characteristics of rapid growth through mergers and acquisitions (M&A).

The Fair Trade Commission designated 34 corporate groups with total assets of 10 trillion won or more among the publicly disclosed corporate groups (affiliated companies: 1,473) as mutual shareholding restricted corporate groups. The number of mutual shareholding restricted corporate groups remained the same as the previous year (34), but there were changes in the composition. Daewoo Construction was newly designated, and OCI was excluded. The number of affiliated companies increased by 52 compared to the previous year (1,421).

For affiliated companies of mutual shareholding restricted corporate groups, additional restrictions such as prohibition of mutual shareholding, prohibition of circular shareholding, prohibition of debt guarantees, and limitations on voting rights of financial and insurance companies apply.

Analysis of financial data showed that the management performance of large corporate groups deteriorated. The concentration of assets in top groups and polarization phenomena were found to have eased. Sales slightly decreased compared to the previous year (1,422 trillion won → 1,401.6 trillion won), and net income dropped by 48.1% (92.5 trillion won → 48 trillion won), indicating an overall deterioration in management performance. The Fair Trade Commission cited the downturn in the semiconductor and petrochemical industries in 2019 as the main cause of the performance decline in top groups.

The gap between top and bottom groups based on total assets was found to have decreased compared to the previous year. Although the top five corporate groups still accounted for a high proportion of the total publicly disclosed corporate groups (64), their share decreased compared to the previous year. The share of the top five groups decreased from 54.0% to 52.6% in total assets, from 57.1% to 55.7% in sales, and from 72.2% to 68.5% in net income.

A Fair Trade Commission official stated, "We plan to continuously analyze and disclose information related to these groups to support strengthening market monitoring functions," adding, "Especially from this year, we will shorten the analysis and announcement cycle of voting rights exercise status of financial and insurance companies (from 3 years to 1 year), expand the scope of information disclosure, and enhance analysis techniques to provide higher quality information to the market."

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