LG Group Unveils Plan to Establish New Holding Company Centered on Five Firms Including LG Sangsa, LG Hausys, and Silicon Works
LG Group Advisor Koo Bon-jun Appointed as CEO of New Holding Company, Signaling Steps Toward Affiliate Separation
[Asia Economy Reporter Changhwan Lee] LG Group has revealed plans to establish an additional holding company to separate affiliates such as LG Sangsa, Silicon Works, LG Hausys, LG MMA, and Pantos. The new holding company will be led by Koo Bon-joon, an advisor to LG Group, and will operate independently from LG Group.
By separating the management rights to Koo Bon-joon, the uncle of the chairman, the management control has been further stabilized, and by retaining the CEOs of major affiliates, it is evaluated that the current system will be maintained while clearly signaling a direction for more aggressive management in the future.
On the 26th, LG Corporation held a board meeting and resolved a plan to split the investment divisions of four subsidiaries?LG Sangsa, Silicon Works, LG Hausys, and LG MMA?out of the 13 subsidiaries under LG Corporation, to establish a new holding company tentatively named ‘LG New Holding Corporation.’
The plan is for ‘LG New Holding Corporation (tentative)’ to incorporate these four companies as subsidiaries and Pantos, under LG Sangsa, as a subsidiary company. ‘LG New Holding Corporation (tentative)’ will operate under an independent management system with a new board of directors.
The board will consist of internal directors including Koo Bon-joon, LG Advisor (CEO), Song Chi-ho, LG Sangsa Advisor (CEO), and Park Jang-su, Executive Director of LG Corporation’s Finance Team; and outside directors including 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 complete the company split approval process at the regular shareholders' meeting on March 26, 2021, and launch the restructured entity on May 1, consisting of the surviving company LG Corporation and the newly established ‘LG New Holding Corporation (tentative).’ It is expected that Advisor Koo Bon-joon will separate ownership by exchanging his shares in LG Corporation for shares in the new holding company.
The company explained that this board resolution was made based on the judgment that it is necessary to swiftly transition to a structure that can further specialize in managing the business portfolio of the holding company.
After the split, the surviving 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 corporate value for each holding company and its subsidiaries.
Since Chairman Koo Kwang-mo’s inauguration in 2018, LG has been strengthening growth engines such as batteries, large OLEDs, and automotive electronics while downsizing non-core businesses like fuel cells, water treatment, and LCD polarizers according to the ‘selection and concentration’ strategy for its business portfolio. The completion of this split is expected to conclude the three-year business restructuring process.
An LG official said, "LG, the first major domestic conglomerate 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 by promoting affiliate separation in the future, the group’s governance will be simplified, uncertainties resolved, and it will align with the direction of mitigating economic power concentration among large corporations."
◆ Major CEOs Reappointed, Koo Kwang-mo Regime Strengthened
In the business community, LG’s affiliate separation is analyzed as a move that does not significantly affect the group’s core electronics and chemical affiliates while naturally allowing Advisor Koo to exit, preserving both practical and symbolic aspects. Unlike other groups where affiliate separation leads to management disputes, LG is interpreted as reinforcing Chairman Koo’s power by adhering to its unique non-conflict eldest-son succession principle.
The CEO appointments are also expected to solidify Chairman Koo’s regime. Among the four vice chairmen, except for Ha Hyun-hoe, Vice Chairman of LG Uplus, Kwon Young-soo, Vice Chairman of LG Corporation, Cha Seok-yong, Vice Chairman of LG Household & Health Care, and Shin Hak-cheol, Vice Chairman of LG Chem, were all reappointed.
Vice Chairman Kwon has been a close aide supporting management since Chairman Koo’s inauguration. He is said to have earned great trust from Chairman Koo by significantly contributing to management succession and group stability. Vice Chairmen Cha and Shin have been highly recognized for their management capabilities, achieving record-breaking performances annually since their appointments, and are expected to continue leading their companies next year. In particular, LG Chem is expected to pursue aggressive management by expanding its successful secondary battery business and increasing market share.
The only one stepping down is Vice Chairman Ha, whose retirement was decided at the LG Uplus board meeting held the previous day. Ha, considered a close aide of Advisor Koo, is expected to take on a key role at LG Sangsa or LG Hausys, which will be separated affiliates in the future.
However, there are also expectations of significant generational changes in executive appointments at major affiliates such as LG Electronics, LG Chem, and LG Household & Health Care, which will conduct personnel changes after LG Corporation. While maintaining stable management by retaining the existing vice chairmen, the aim is to continue merit-based generational replacement among the working-level executives.
As in the previous year, there is also an expectation of appointing capable female personnel. LG Display, which announced its regular personnel appointments the day before, appointed Kim Hee-yeon as its first female executive director.
Koo Bon-joon, LG Group Advisor
◆ Split Ratio: LG Corporation 0.911, New Holding Company 0.088
This split will be carried out by a spin-off of the investment divisions of LG Corporation’s subsidiaries, including listed subsidiaries LG Sangsa, Silicon Works, LG Hausys, and unlisted subsidiary LG MMA, so that both the surviving and newly established holding companies can maintain the current holding and listed company structure.
The split ratio is based on the net asset book value in the separate financial statements of the surviving and new holding companies, with LG Corporation at 0.9115879 and the new holding company at 0.0884121.
Accordingly, upon completion of the split procedure 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 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 surviving and new companies will remain the same before and after the split.
After the split, the surviving 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 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%.
After the split, both the surviving and new holding companies plan to maximize corporate value by enhancing profitability, stability, and growth through specialization of core businesses, concentration of capabilities and resources, and advancement of management.
The surviving LG Corporation will focus on strengthening competitiveness in core businesses such as electronics (home appliances, displays, automotive electronics), chemicals (petrochemicals, batteries, bio), and telecommunications services (5G, IT), securing future growth engines. It will proactively create customer value and innovate business models by integrating digital and online new technologies.
The new holding company plans to increase business focus and establish a rapid decision-making system based on specialization and exclusivity, concentrating investments on growth businesses and drastically transforming its business portfolio and models.
The businesses under the new holding company?resource development and infrastructure (LG Sangsa), logistics (Pantos), system semiconductor design (Silicon Works), building materials (LG Hausys), and basic materials (LG MMA)?have competitive positions in their respective industries and high growth potential. The company emphasized that it plans to nurture these as core businesses by expanding external business and exploring various business opportunities through this split.
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