While Others Split, Meritz's 3 Companies Merged... Stock Prices Soared Vertically

[Asia Economy Reporter Kwon Jae-hee] "An unprecedented event in the history of the Korean stock market"

"A strong message prioritizing shareholder interests"

On the 21st, when Meritz Financial Group announced that it would delist its major listed subsidiaries and incorporate them as wholly owned subsidiaries, the securities industry responded with such reactions.

Meritz Financial Group stated that it would incorporate Meritz Fire & Marine Insurance and Meritz Securities as 100% subsidiaries and pursue a comprehensive stock swap with the shareholders of the two companies.

Meritz Financial Group announced, "This is to implement a stable and sustainable shareholder return policy," adding, "We will use at least 50% of net income for dividends, share buybacks, and cancellations for at least the next three years."

As a result, the stock prices of the three Meritz companies surged simultaneously. On the 22nd, immediately after the announcement, all three Meritz companies hit the upper price limit, and the next day, Meritz Financial Group closed at the upper limit. Meritz Securities and Meritz Fire & Marine Insurance rose by up to 12.27% and 18.53%, respectively.

This announcement by Meritz Financial Group is a rare decision in the Korean stock market. Holding companies like SK and Lotte typically split subsidiaries and list them one after another. The controversial Kakao also split and listed Kakao Games, Kakao Pay, and Kakao Bank. Major shareholders can increase control over multiple affiliates with only a small stake in the holding company, and overlapping listings increase the group's market capitalization and facilitate fundraising. In other words, it is a structure that strengthens the controlling family's dominance.

However, Meritz's decision goes against the trend in the Korean stock market and actually lowers the major shareholder's (owner's) stake. If the comprehensive stock swap to make Meritz Fire & Marine Insurance and Meritz Securities 100% subsidiaries is carried out, Chairman Jo Jung-ho's stake in Meritz Financial Group will decrease from the mid-70% range to about 47%.

For this reason, experts evaluated that "Meritz Financial Group clearly conveyed the message that it prioritizes shareholder interests."

Securities firms are also raising their target prices for Meritz. Samsung Securities raised the target price for Meritz Fire & Marine Insurance from 45,000 won to 47,000 won and for Meritz Securities from 4,900 won to 5,900 won. Shinhan Investment Corp. also raised the target price for Meritz Financial Group from 29,000 won to 38,000 won.

Researcher Jung Min-ki of Samsung Securities praised, "Recently, in the stock market, subsidiary spin-offs have been controversial due to the decline in parent company value and double counting of corporate value from simultaneous listings of parent and subsidiaries. The decision to merge three listed companies into one is the exact opposite of recent capital market trends," adding, "This aligns the interests of minority shareholders and major shareholders."

Meanwhile, as the stock prices of Meritz Financial Group and its major subsidiaries surged simultaneously, Chairman Jo Jung-ho's stock holdings also increased significantly. The value of Chairman Jo's stock holdings rose by about 830 billion won, propelling him from 9th to 6th place in the ranking of domestic stock billionaires, surpassing SK Group Chairman Chey Tae-won, Hyundai Motor Group Chairman Chung Eui-sun, and Kakao founder Kim Beom-su.