LG Group Gwangmo Koo Moves to Independent System... Puzzle of Affiliate Separation Completed (Comprehensive)

LG Sangsa and LG Hausys, Separated from the Group, Incorporated into New Holding Company for Independent Management

[Image source=Yonhap News]

[Asia Economy Reporter Kim Hyewon] LG Group is carrying out a separation of affiliates centered on former LG Group Advisor Koo Bon-jun, who stepped down from the front lines of management in accordance with the principle of primogeniture succession. With this, LG Group’s independent system under Chairman Koo Kwang-mo, who inherited management rights following the passing of the late Chairman Koo Bon-moo, has been solidified.

On the morning of the 26th, LG Corporation held a board meeting and resolved a plan to split four subsidiaries?LG International, Silicon Works, LG Hausys, and LG MMA?out of its 13 subsidiary investment sectors to establish a new holding company tentatively named "LG New Holding Corporation."

LG New Holding Corporation will incorporate these four companies as subsidiaries and include Pantos, under LG International, as a subsidiary. These companies will be managed by Advisor Koo, the third son of the late Honorary Chairman Koo Ja-kyung and younger brother of the late Chairman Koo Bon-moo. This marks 2 years and 6 months since LG Group achieved a generational change under Chairman Koo Kwang-mo.

The board composition includes internal directors such as Advisor Koo (CEO), Advisor Song Chi-ho of LG International (CEO), and Executive Director Park Jang-su of LG Corporation’s Finance Team. Outside directors appointed are Kim Kyung-seok, former CEO of Yuri Asset Management; Lee Ji-soon, Professor Emeritus of Economics at Seoul National University; Jung Soon-won, former member of the Financial Monetary Policy Committee; and Kang Dae-hyung, adjunct professor at Yonsei University Graduate School of Economics. Additionally, Kim Kyung-seok, Lee Ji-soon, and Jung Soon-won will be appointed as audit committee members.

LG Corporation plans to undergo the company split approval process at the regular shareholders’ meeting on March 26 next year, and then reorganize into two holding companies?existing LG Corporation and the newly established LG New Holding Corporation?effective May 1.

This board resolution is based on the judgment that it is necessary to promptly transition to a structure that can further specialize in managing the business portfolio of the holding company. The future management environment is expected to change rapidly due to intensified global economic uncertainties caused by COVID-19 and the spread of the digital economy accelerated by the Fourth Industrial Revolution, making agile and effective responses essential for corporate survival and growth.

After the split, the existing LG Corporation will focus its capabilities and resources on electronics, chemicals, and telecommunications services, while the new holding company will nurture business companies with growth potential as core enterprises, maximizing the corporate value of each holding company and its subsidiaries.

Since Chairman Koo’s inauguration in 2018, LG has strengthened growth engines such as batteries, large OLEDs, and automotive electronics while downsizing non-core businesses like fuel cells, water treatment, and LCD polarizers under the 'selection and concentration' strategy for its business portfolio. Upon completion of this split, the three-year business restructuring process is expected to conclude.

An LG official said, "LG, the first major domestic company to transition to an advanced holding company governance structure, has continuously specialized its business areas and management capabilities to strengthen business competitiveness. We expect that when pursuing affiliate separation in the future, the group’s governance structure will be simplified, uncertainties resolved, and it will align with the direction of mitigating economic power concentration among large corporations."

This split will be carried out by a spin-off of LG Corporation’s subsidiary investment sectors, including listed subsidiaries LG International, Silicon Works, LG Hausys, and unlisted subsidiary LG MMA, so that both the existing and new holding companies can maintain the current holding and listed company system.

The split ratio is based on the net asset book value on the separate financial statements of the existing and new holding companies: LG Corporation 0.9115879, new holding company 0.0884121. Accordingly, upon completion of the split on May 1 next year, shareholders holding 100 shares of LG Corporation will receive 91 shares of LG Corporation and 44 shares of the new holding company, which has set its par value at 1,000 won to meet the re-listing stock number requirements. Fractional shares will be converted to cash based on the closing price on the first day of re-listing. The shareholder composition of the existing and new companies will remain the same before and after the split.

After the split, the existing LG Corporation will have a total of 160,322,613 shares issued, assets of 9.7798 trillion won, capital of 9.3889 trillion won, liabilities of 390.9 billion won, and a debt ratio of 4.2%. The new holding company will maintain a sound financial structure with 77,745,975 shares issued, assets of 913.3 billion won, capital of 910.8 billion won, liabilities of 2.5 billion won, and a debt ratio of 0.3%.

Meanwhile, following LG Corporation, major affiliates such as LG Electronics and LG Chem also held board meetings on the same day to finalize year-end personnel appointments.