[Into the Stocks] BGF Group Opening the Era of Second-Generation Management

Hong Seok-jo BGF Chairman Transfers Shares via Block Deal
Strengthens Control While Reducing Gift Tax

[Asia Economy Reporter Kwon Jae-hee] Hong Seok-jo, chairman of BGF Group, transferred shares to his two sons through a block deal (large-scale trading outside regular hours). By lowering his ownership stake, Chairman Hong saved on inheritance and gift taxes while strengthening the controlling power of the owner family. The market interpreted this as a move toward stable management succession and enhancing shareholder value, which also led to a sharp rise in the stock price. By lowering his ownership stake, Chairman Hong saved on inheritance and gift taxes while strengthening the controlling power of the owner family. The market interpreted this as a move toward stable management succession and enhancing shareholder value, which also led to a sharp rise in the stock price.

According to the securities industry on the 5th, on the 30th of last month, Chairman Hong sold 10,025,095 shares (10.47%) of BGF stock each to his eldest son, Hong Jeong-guk, president and CEO of BGF, and his second son, Hong Jeong-hyeok, president and CEO of BGF Ecomaterials, through a block deal. A block deal refers to a large-scale stock transaction between a seller and a buyer. As a result, Chairman Hong's stake decreased from 53.34% to 32.4%, while President Hong Jeong-guk's and CEO Hong Jeong-hyeok's stakes increased from 10.29% to 20.77% (19,878,040 shares) and from 0.03% to 10.5% (10,058,120 shares), respectively.

This share transaction effectively lowered the highest gift tax rate while strengthening the controlling power of the owner family. If the largest shareholder holds more than 50%, the gift tax is surcharged by 30%. The gift tax rate also applies at the highest level of 65%. Through this block deal, Chairman Hong's ownership decreased to 32.4%, reducing the tax burden while still maintaining his position as the largest shareholder, thereby keeping the group's control solid.

The market interprets this share transfer within BGF Group as the 'full-scale start of second-generation management' and 'enhancement of shareholder value through strengthened responsible management.' The stock price responded accordingly. BGF's stock price rose as much as 25.34% on the 30th of last month and closed at 4,365 won, up 18.29%. As of 9:37 a.m. on the 5th, it was trading at 4,455 won, up 0.79%.

In the securities industry, it is analyzed that the resolution of uncertainty in share succession, the full-scale start of second-generation management, and the intention to strengthen new businesses positively influenced the stock price. Park Jong-ryeol, a researcher at Heungkuk Securities, said, "Block deals can negatively affect stock prices if conducted with third parties, but transferring shares to family members is a positive factor as it reduces uncertainty in succession."

Nam Seong-hyun, a researcher at IBK Investment & Securities, also explained, "This means the full-scale start of second-generation management," adding, "It is interpreted as an intention to strengthen capabilities in new business sectors (such as bioplastics) while achieving stable growth based on the convenience store business."