Unexpected 'Owner Risk' in the Succession Structure of Celltrion Group

Value of Shares Held by Holding Company Celltrion Holdings at 7.3 Trillion KRW
Chairman Seo Jung-jin Holds 97.19% Stake in Celltrion Holdings
Two Daughters Registered in Family Register Can Secure 600 Billion KRW Each in Inheritance Portion Return Lawsuit

A sudden 'owner risk' has emerged with the revelation that Seo Jung-jin, Chairman of Celltrion, has children born out of wedlock. By registering his two daughters born out of wedlock in the family register, Seo Jung-jin has introduced a potential variable into the succession structure.

According to industry sources on the 4th, the Suwon Family Court Seongnam Branch ruled in June last year, following a mediation agreement, that Chairman Seo must recognize his two daughters in their 20s and teens as his biological children. Seo registered the two daughters as his legal children in the family register. Legally, this means there are two more people who will share Seo's inheritance.

Chairman Seo has two sons with his wife Park Kyung-ok. The eldest son, Seo Jin-seok, serves as chairman of the boards of Celltrion and Celltrion Pharm, while the younger son, Seo Jun-seok, is chairman of the board of Celltrion Healthcare. Both are active as key executives. With the two daughters now registered in the family register, it cannot be ruled out that the shareholding structure of these heirs may change.

Seo Jung-jin, Chairman of Celltrion.

Chairman Seo Jung-jin returned to the forefront of management at the Celltrion regular shareholders' meeting held in March after two years. He serves as co-chairman of the boards of Celltrion Group affiliates, leading the merger of three listed companies and mergers and acquisitions (M&A) investments, and is spearheading group affairs. Although he planned to secure growth momentum for the group through his characteristic speed management, the issue of children born out of wedlock, which could become a variable in the succession structure, surfaced less than two months after his return.

Looking at the governance structure of Celltrion Group, the holding company Celltrion Holdings owns 20.04% and 24.27% stakes in the core affiliates Celltrion and Celltrion Healthcare, respectively. Chairman Seo holds 97.19% of Celltrion Holdings' shares.

Celltrion Group has never officially mentioned succession issues. However, the business community expects the succession structure to be centered around the eldest son. Chairman Seo Jin-seok also concurrently serves as an inside director of Celltrion Holdings and Celltrion Pharm.

Under current inheritance law, if there is no will, the surviving spouse receives 1.5 times more of the estate than the children. The remaining estate is divided equally among the children. Before the two daughters appeared, the two sons could inherit 27.77% of Celltrion Holdings' shares, and wife Park Kyung-ok could receive 41.66%. With the two daughters registered in the family register, Park's share decreases to 26.51%, and the sons' share also decreases to 17.67%.

Since Chairman Seo is likely to empower his successor through gifts, the legal inheritance shares may not be very significant. However, if the two daughters judge that their inheritance shares are significantly small, they can file a claim for the return of their statutory portion. They can receive at least half of the share prescribed by inheritance law.

A legal expert explained, "Children automatically become heirs upon the father's death, and even if inheritance shares are reduced by wills or gifts to others, they can receive part of their statutory portion through litigation. Gifts are contracts where property is given voluntarily, so unless there is a specific gift agreement, it is difficult to demand them."

The value of Celltrion Holdings can be estimated through its stakes in Celltrion and Celltrion Healthcare. As of the closing price on the 3rd, the market capitalization of Celltrion and Celltrion Healthcare was 23.3 trillion KRW and 11.1 trillion KRW, respectively. Celltrion Holdings' 20.04% stake in Celltrion is worth 4.66 trillion KRW, and its 24.27% stake in Celltrion Healthcare is worth 2.69 trillion KRW. The value of the two affiliates' shares held by Celltrion Holdings alone amounts to approximately 7.35 trillion KRW. Since these are controlling shares, there is a premium factor when selling. If the two daughters file a claim for the return of their statutory portion, they could each inherit shares worth over 600 billion KRW.

Since Chairman Seo is leading the management of Celltrion Group and holds over 97% of Celltrion Holdings' shares, his intentions are crucial in the succession structure. If he does not concentrate more than 50% of Celltrion Holdings' shares in one of his two sons, the two daughters could play a casting vote role. Considering the possibility of selling some shares to prepare for inheritance tax, there is even a chance that someone outside the owner family could exert influence over Celltrion Group's management.

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