Jang Se-ju, Chairman of Dongkuk Steel, Gifts 200,000 Shares to Executive Director Jang Seon-ik

Dongkuk Steel Announces Demerger
Will It Expand Control Through Treasury Stock Magic?

Jang Se-ju, chairman of Dongkuk Steel, has gifted his shares to his eldest son, Executive Director Jang Seon-ik, and his second son, Jang Seung-ik. This is interpreted as Dongkuk Steel, which is preparing for a spin-off, beginning the succession process to the fourth generation with Executive Director Jang Seon-ik.

According to the Financial Supervisory Service's electronic disclosure system on the 2nd, Chairman Jang announced that he gifted 200,000 shares to his eldest son, Executive Director Jang Seon-ik. As a result, Executive Director Jang Seon-ik's holdings increased from 790,703 shares (0.83%) to 990,703 shares (1.04%).

At the same time, Chairman Jang gifted 100,000 shares to his second son, Jang Seung-ik. Jang Seung-ik's shares increased from 350,000 shares (0.37%) to 450,000 shares (0.47%).

Currently, the ownership stakes of the Dongkuk Steel owner family are as follows: Chairman Jang Se-ju 13.62%, Vice Chairman Jang Se-wook 9.43%, Executive Director Jang Seon-ik 1.04%, younger sister Jang Yoon-hee 0.59%, and second son Jang Seung-ik 0.47%.

Earlier, Dongkuk Steel announced that it had decided on a spin-off this year. If the spin-off is executed, the existing company will be divided into the holding company Dongkuk Holdings and two newly established companies: Dongkuk Steel (hot-rolled steel business) and Dongkuk CM (cold-rolled steel business).

The spin-off, also known as the 'treasury stock magic,' can strengthen the controlling power of the owner family. When a spin-off occurs, existing company shareholders receive shares of the new company proportional to their holdings. By allocating new shares of the new company to the treasury shares of the existing company, the major shareholder's (owner family's) stake effectively increases.

While the owner family's control expands, individual investors experience dilution of their shares. Although companies cite 'improvement of governance' as a rationale for converting to a holding company, there have been continuous criticisms that it is actually used as a means to strengthen the owner family's control.

Recently, amid a wave of 'shareholder proposals' by private equity funds, individual investors have become critical of corporate spin-offs. Previously, Hyundai Department Store's spin-off was rejected at a shareholders' meeting due to opposition from minority shareholders. Dongkuk Steel will also hold a shareholders' meeting to vote on the spin-off proposal. The shareholders' meeting is scheduled for May.