Strengthening Efforts for Future Growth and Enhancing Corporate Value

POSCO Transitioning to Holding Company Structure
Steel Subsidiary Unlisted
Retaining All Shares
Holding Company Takes Subsidiary's Performance
Protecting Holding Company Stock Price
Strategy to Minimize Shareholder Backlash

[Asia Economy reporters Choi Daeyeol and Hwang Yoonju] The apparent reasons for POSCO's decision to switch to a holding company structure are mainly to "strengthen future growth potential" and "enhance corporate value." Its core steel business faces challenges in maintaining competitiveness compared to other companies in China and elsewhere, and as a major carbon emitter, further growth is expected to be difficult.

Additionally, the management has long been troubled by the market's failure to properly evaluate the company's corporate value. As of the morning of the 10th, POSCO's market capitalization stood at 24.7 trillion won, which is less than Kakao Pay's 25.9 trillion won. Considering POSCO's sales reached 28 trillion won and operating profit nearly 5 trillion won up to the third quarter this year, this is a dismal level. Kakao Pay's cumulative sales for the third quarter were 292.8 billion won, with an operating profit of 18.1 billion won.

The choice of an unlisted subsidiary after a physical division is interpreted as a measure to consider existing shareholders' opposition. In the past, companies like LG Chem and SK Innovation faced strong shareholder backlash when spinning off their secondary battery businesses through physical division. Physical division means the existing company holds all shares of the newly established company, which can damage corporate value for shareholders who invested based on the business competitiveness of the original company.

POSCO Chairman Choi Jung-woo is delivering a greeting at the 'Youth Hope ON Project' meeting held last month at the POSCO Center in Gangnam-gu, Seoul. Photo by Hyunmin Kim kimhyun81@

POSCO Chairman Choi Jung-woo Likely to Lead Holding Company

POSCO plans to create a structure where the holding company retains full ownership of the newly established steel business subsidiary without conducting an initial public offering (IPO), allowing the holding company to directly benefit from the subsidiary's dividends and performance, thereby protecting the holding company's stock price. While most companies that recently chose physical division did so to raise funds, POSCO appears to have judged that it is not urgent to secure investment capacity through an IPO given its current cash reserves.

Under the holding company system, POSCO Holdings (tentative name) will sit at the top, with the steel subsidiary alongside existing subsidiaries such as POSCO Chemical (refractories and materials), POSCO Steel Sheet, POSCO Energy, and POSCO Construction. There is also the possibility of including other subsidiaries engaged in hydrogen, new materials, and artificial intelligence (AI) businesses, which POSCO Group has recently been emphasizing.

The holding company may also directly engage in mergers and acquisitions (M&A) investment activities. Recently, among major domestic conglomerates, investing in or acquiring shares of promising domestic and overseas companies has become an important means of business expansion. SK Group's holding company SK Inc. declared itself an investment-focused company earlier this year, and Hanwha also transformed its key affiliates into an investment-type holding company. Chairman Choi Jung-woo is highly likely to serve as the head of the holding company. The board's decision will be finalized after an extraordinary shareholders' meeting scheduled for next month. Specific timing and methods of the transition are to be decided later.

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