"Next is Hyosung Chemical?" Hyosung's Cho Hyun-sang Continues Share Sale

Subsidiary Shareholding Adjustment... Hyosung Chemical 6.3%
Share Swap Expected After New Holding Company Establishment

Ahead of the Hyosung Group's spin-off, Vice Chairman Cho Hyun-sang is expected to sell his shares in Hyosung Chemical following his sale of shares in Hyosung Heavy Industries.

According to industry sources on the 3rd, as of the end of last year, Vice Chairman Cho holds 233,663 common shares of Hyosung Chemical, accounting for a 6.3% stake. The largest shareholder of Hyosung Chemical is Hyosung Corporation with 32.84%, followed by Chairman Cho Hyun-joon with 7.37%, and the late Honorary Chairman Cho Seok-rae with 6.16%. It is expected that Vice Chairman Cho will sell more than half of his holdings soon.

[Image source=Yonhap News]

This is due to the upcoming spin-off scheduled for July. Under the current Fair Trade Act, for spin-offs among relatives, the cross-shareholding ratio must be reduced to less than 3% for listed companies (less than 10% for unlisted companies).

Immediately after the passing of Honorary Chairman Cho, Vice Chairman Cho sold shares of Hyosung Heavy Industries to reduce his stake to below 3%. Last month, he sold 205,407 common shares (2.2%) of Hyosung Heavy Industries on the market, lowering his stake from 4.88% to 2.68%.

It is estimated that Vice Chairman Cho secured about 64 billion KRW from the sale of Hyosung Heavy Industries shares. Considering that the closing price of Hyosung Chemical on the 2nd was 58,700 KRW per share, he is expected to secure an additional approximately 13.7 billion KRW. It is speculated that Vice Chairman Cho will use the approximately 78 billion KRW from the share sales to acquire additional shares in the newly established holding company or to pay inheritance taxes.

Hyosung Group had previously arranged the succession management structure through a group split during the lifetime of Honorary Chairman Cho. In February, the board resolved a plan to spin off six companies?Hyosung Advanced Materials, Hyosung Information Systems (HIS), Hyosung Holdings USA, Hyosung Toyota, Gwangju Ilbo, and Vina Logistics Corporation?through a physical division to establish a holding company tentatively named ‘New Hyosung Holding Company.’

On the other hand, unlike Vice Chairman Cho, Chairman Cho does not hold shares in the companies being separated, so there is no need to sell shares before the split.

Cho Hyun-sang, Vice Chairman of Hyosung

The New Hyosung Holding Company, set to be established on July 1, recently passed the preliminary review by the Korea Exchange for re-listing of its shares, confirming that it meets the listing requirements and is eligible for re-listing.

However, according to the spin-off report submitted by the New Holding Company, it does not meet the shareholding ratio requirements for subsidiaries under the holding company activity restrictions (30% for listed companies, 50% for unlisted companies). Therefore, the New Holding Company plans to meet the shareholding criteria within two years of the spin-off date by additionally acquiring shares in Hyosung Advanced Materials (22.3%) and Gwangju Ilbo (49.0%).

There is also interest in how the shares of Honorary Chairman Cho will be divided after the establishment of the new holding company. Honorary Chairman Cho left shares including 10.14% in Hyosung Corporation, 10.55% in Hyosung Heavy Industries, 10.32% in Hyosung Advanced Materials, 9.09% in Hyosung TNC, and 6.16% in Hyosung Chemical.

It is likely that the shares will be divided according to the statutory inheritance shares among the late chairman’s spouse, Song Gwang-ja, and his three sons, Cho Hyun-joon, Hyun-moon, and Hyun-sang (spouse 1.5, each child 1). However, there is speculation that, according to the late chairman’s will, former Vice President Cho Hyun-moon, who caused a family dispute, may have been excluded from the inheritance.