POSCO to Become a Holding Company... "Steel Subsidiaries and New Businesses Will Not Be Listed" (Comprehensive)

Board Meeting Held on the 10th to Approve Holding Company Proposal
Existing Listed Company to Remain as Holding Company
Physical Split with New Spin-off Company Handling Steel Business

[Asia Economy Reporters Choi Dae-yeol and Hwang Yoon-joo] POSCO is transitioning to a holding company structure. Currently engaged in the steel business, POSCO will become a holding company that manages investment businesses while overseeing operating companies, with the existing steel business spun off into a separate subsidiary through a physical division. POSCO, ranked sixth among business conglomerates with six listed companies and 28 unlisted companies, is undergoing its biggest governance change since its privatization in 2000.

On the 10th, POSCO's board of directors approved the agenda for the transition to a holding company structure. There had been much market interest regarding which division method would be chosen, and ultimately, the physical division method was selected. The subsidiary spun off from POSCO will handle the steel business, but this steel company will not be listed; instead, the holding company will own 100% of the shares of the newly established subsidiary responsible for the steel business.

POSCO explained, "We have explored various measures to ensure sustainable growth and enhance corporate value amid rapidly changing management environments such as the great transition to a low-carbon and eco-friendly era, accelerated technological innovation, and strengthened ESG (environment, social, governance) management," adding, "We determined that transitioning to a holding company structure that discovers future new businesses for the group and is responsible for business and investment management is essential."

POSCO Center, Teheran-ro, Gangnam-gu, Seoul / Photo by Hyunmin Kim kimhyun81@

POSCO Transitioning to a Holding Company Structure
Steel Subsidiary Unlisted... Retaining Full Ownership
Holding Company Takes Subsidiary’s Performance
Strategy to Protect Holding Company Stock Price and Minimize Shareholder Opposition

The apparent reasons POSCO decided to switch to a holding company structure are mainly to ‘strengthen future growth potential’ and ‘enhance corporate value.’ The core steel business faces challenges in maintaining competitiveness compared to companies in China and elsewhere, and is also identified as a major carbon emitter, making further growth difficult. This has long been a headache for management, as the market has not properly valued the company’s worth. As of the morning of the 10th, POSCO’s market capitalization stood at 24.7 trillion KRW, less than Kakao Pay’s 25.9 trillion KRW. Considering POSCO’s sales of 28 trillion KRW and operating profit nearing 5 trillion KRW through the third quarter of this year, this is a dismal level. Kakao Pay’s cumulative sales for the third quarter were 292.8 billion KRW, with an operating profit of 18.1 billion KRW.

Choosing the unlisted subsidiary option after the physical division is interpreted as a measure to consider existing shareholders’ opposition. In previous cases such as LG Chem and SK Innovation spinning off their secondary battery businesses, physical divisions sparked strong shareholder backlash. Physical division means the existing company holds all shares of the newly established company, which can damage corporate value for shareholders who invested trusting the business competitiveness of the original company.

POSCO plans not to conduct an IPO for the newly established steel business subsidiary under the holding company, retaining full ownership of its shares. This structure allows the holding company to directly benefit from the subsidiary’s performance, thereby protecting the holding company’s stock price. Unlike most companies that recently chose physical division for fundraising purposes, POSCO appears to have sufficient cash reserves and does not urgently need to secure investment capacity through an IPO.

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@

Additionally, new businesses currently operated by POSCO, such as hydrogen and nickel, will be placed under newly established corporations beneath the holding company. These new corporations will also avoid IPOs. The company stated, "This will prevent damage to existing shareholder value caused by re-listing core businesses and block conflicts of interest between holding company and subsidiary shareholders," describing it as "an advanced corporate governance model where the value of unlisted subsidiaries directly connects to the value of holding company shareholders."

Under the holding company system, POSCO Holdings will be at the top, with the steel subsidiary POSCO alongside existing subsidiaries such as POSCO Chemical, Steel Plate, Energy, International, and Construction arranged side by side. The group has designated steel, secondary battery materials, lithium and nickel, hydrogen, energy, construction and infrastructure, and food as core foundational businesses. The goal is to increase corporate value more than threefold by 2030 by enhancing competitiveness in each operating company. If there are no changes in the board, Chairman Choi Jeong-woo, currently CEO of POSCO, is expected to become the CEO of the holding company. Kim Hak-dong, currently serving as head of the steel division and production technology headquarters at POSCO, is likely to become CEO of the steel subsidiary.

The plan will be finalized if approved at the extraordinary general meeting scheduled for the 28th of next month. The POSCO Group stated, "Although there have been several discussions about transitioning to a holding company in the past, the current moment, marked by revolutionary changes never before experienced, is the optimal time for restructuring management," adding, "We will strengthen expertise by business and discover and nurture future new business opportunities to create synergy across group businesses."

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