[Click eStock] LG's Human Spin-off: Will the Two Holding Company Structure Enhance Business Competitiveness?

Efficiency and Business Competitiveness Increased Through Independent Management

[Asia Economy Reporter Minwoo Lee] Attention is focused on whether LG's transition to a two holding company system will lead to an increase in corporate value in the future.

On the 27th, Daishin Securities maintained a 'Buy' investment rating and a target price of 110,000 KRW for LG for this reason. The closing price the previous day was 77,200 KRW.

Earlier, LG decided to establish a new holding company, 'LG New Holding Company (tentative name),' through a spin-off. The new holding company is expected to control LG International, LG Hausys, LGMMA, Silicon Works, and Pantos, focusing on managing each company's performance and business portfolio.

The split ratio between LG and LG New Holding Company is 0.9115879 to 0.0884121. If you held 100 shares of LG before the split, after the split you would receive 91 shares of LG, 8 shares of LG New Holding Company, and cash. However, to secure the number of circulating shares, the par value of the new corporation was set at 1,000 KRW, so existing shareholders will receive 91 shares of LG, 44 shares of LG New Holding Company, plus cash. After the shareholders' meeting on March 26 next year and the registration of the split, the new and split listings will take place on May 27 of the same year. The record date for new share allocation is April 30, and trading will be suspended from April 29 to May 27 for the split re-listing and new listing.

The new holding company will be led by Koo Bon-joon, the third son of the late LG Honorary Chairman Koo Ja-kyung and younger brother of the late LG Chairman Koo Bon-moo. After the re-listing and new listing due to the split, it is expected that LG Chairman Koo Kwang-mo and Advisor Koo will exchange shares promptly, completing the separation of affiliates. As of the end of September last year, Chairman Koo and Advisor Koo held 2,753,100 shares (15.95%) and 13,317,000 shares (7.72%) of LG stock, respectively. After the split, Chairman Koo will hold approximately 26,096,700 shares of LG and 12,172,000 shares of the new holding company. Advisor Koo is expected to hold 12,140,000 shares of LG and 5,887,100 shares of the new holding company.

The split itself does not have a significant impact on LG's corporate value, but there is analysis that corporate value could increase depending on future operations. Yang Ji-hwan, a researcher at Daishin Securities, explained, "The split decision does not significantly affect LG's dividend policy and profit structure, and there is expected to be no change in brand royalty receipts until 2021," adding, "If the two holding companies enhance efficiency and business competitiveness through independent and responsible management, corporate value could increase."

This content was produced with the assistance of AI translation services.