[Click eStock] Hyundai Department Store Completes Holding Company Transition 'Group Value Increase'

On the 7th, IBK Investment & Securities analyzed that the value of the Hyundai Department Store Group is expected to rise after completing its transition to a holding company structure. This is because the roles of the operating companies and the holding company will become clearer, enabling synergy creation among affiliates. Additionally, it is expected that the dividend payout ratio of major subsidiaries will increase further following the governance restructuring.

The day before, Hyundai Department Store Group announced a plan to complete its transition to a holding company centered on Hyundai GEF Holdings. The core of the plan is to incorporate Hyundai Department Store as a major subsidiary through a public tender offer and contribution in kind of Hyundai Green Food, and to secure stable management rights by acquiring shares of Hyundai Green Food.

After the transition to a holding company, Hyundai GEF Holdings held a 12% stake in Hyundai Department Store, while Chairman Chung Ji-sun was the largest shareholder of Hyundai Department Store with about 17% ownership. If Hyundai Department Store is incorporated into Hyundai GEF Holdings through this contribution in kind, it is expected to secure about 32% of the shares, considering the maximum tender offer. Furthermore, Hyundai GEF Holdings is expected to secure about 40% of Hyundai Green Food shares by participating in the contribution in kind and paid-in capital increase involving Chairman Chung Ji-sun and Vice Chairman Chung Kyo-sun, who are the largest shareholders of Hyundai Green Food. Accordingly, once the plan is completed, the largest shareholder’s stake in Hyundai GEF Holdings is expected to reach about 60%. As Hyundai Department Store and Hyundai Green Food, which had been divided in a circular shareholding structure, are incorporated as subsidiaries of Hyundai GEF Holdings, the holding company system is expected to be completed.

Nam Sung-hyun, a researcher at IBK Investment & Securities, explained, "The holding company structure reorganized around Hyundai GEF Holdings will increase the value of the group companies," adding, "This is because the uncertainty caused by the reorganization of the holding company system will be resolved, competitiveness of each company will improve through strengthening the business system, and the possibility of expanding shareholder return policies is high." The group had been evaluated as receiving a group discount (due to overhang and uncertainty about major strategic directions) because of the complexity of the governance structure and circular shareholding among some affiliates. However, with this decision, the roles of the operating companies and the holding company become clear, and the structure is reorganized to enable synergy creation among affiliates, eliminating these negative factors and rather increasing positive effects.

It is expected that the dividend payout ratio of major subsidiaries will increase further after the governance restructuring. Researcher Nam pointed out, "Considering the increase in shares due to the paid-in capital increase, the absolute dividend amount of Hyundai GEF Holdings is likely to increase, and additional dividend resources have been secured through the incorporation of major subsidiaries," adding, "Moreover, it is difficult to secure other resources besides dividend income." Hyundai GEF Holdings announced during the recent split that the absolute dividend amount would be about 15 billion KRW or more. Researcher Nam stated, "The expected dividend amount of Hyundai GEF Holdings is judged to greatly exceed this," and recommended having a positive view as "dividends from major subsidiaries are also expected to increase."

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