[Asia Economy Reporter Lee Seon-ae] Meritz Financial Group's two core affiliates, Meritz Fire & Marine Insurance and Meritz Securities, entered the upper price limit early in trading on the 22nd following news that they will be fully incorporated as wholly owned subsidiaries. The holding company is also recording the upper price limit.
As of 9:28 a.m. on the 22nd, Meritz Financial Group was trading at 34,750 KRW, up 29.91% from the previous trading day. Meritz Fire & Marine Insurance (29.97%) and Meritz Securities (29.87%) also entered the upper price limit early in the session. Meritz Securities is trading at 5,870 KRW, up 29.87%. However, Meritz Fire & Marine Insurance slightly pulled back after hitting the upper limit and is trading at 46,150 KRW, up 29.27%.
On the previous day, Meritz Financial Group announced plans to fully incorporate Meritz Fire & Marine Insurance and Meritz Securities as wholly owned subsidiaries through a comprehensive stock swap targeting the shareholders of the two companies. Once the comprehensive swap is completed, Meritz Fire & Marine Insurance and Meritz Securities will each become 100% subsidiaries of Meritz Financial Group. After new shares are issued and the comprehensive swap is completed, Chairman Jo Jung-ho’s holding stake in the group is expected to decrease from the current 75.8% to about 47%. Shareholders of Meritz Fire & Marine Insurance and Meritz Securities who oppose the comprehensive stock swap may request the companies to buy their shares, so the final shareholding ratio after the swap may vary.
Meritz Financial Group emphasized that through the full incorporation of the two affiliates as wholly owned subsidiaries, it will implement a stable and sustainable shareholder return policy. Starting next year, the integrated Meritz Financial Group plans to return 50% of consolidated net income to shareholders as a principle, including dividends and treasury stock buybacks and cancellations. This level exceeds the average shareholder return rates over the past three years for each company (holding company 27.6%, fire insurance 39.7%, securities 39.3%). Meritz Financial Group intends to maintain this proactive shareholder return policy for more than three years.
Jung Min-ki, a researcher at Samsung Securities, said, "With the incorporation of subsidiaries, the double counting issue that applied to the three listed companies will be eliminated," adding, "Going forward, Meritz Financial Group’s valuation is expected to be clearly calculated based on the combined profits and capital of the fire insurance and securities businesses." He further added, "While the holding company is expected to see about a 30% increase in market capitalization, the stock prices of Meritz Securities and Meritz Fire & Marine Insurance are also expected to move in line with the holding company."
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