Controversy Over HL Holdings' 'Trick' in Donating Treasury Shares Ends with Withdrawal

Withdrawal of 16 Billion KRW Worth of Treasury Stock Donation
Foundation Establishment Method to be Reconsidered Later
Decision Made Aware of Fierce Criticism Over Shareholder Value Damage

HL Holdings, led by Chairman Jeong Mong-won, has withdrawn its plan to donate most of its treasury shares to a newly established foundation free of charge. Initially, the treasury shares were acquired to enhance shareholder value, but the move to donate them to a foundation that has yet to be created, seemingly as a tactic to defend management rights, was perceived as causing harm to both shareholders and the company's performance, leading to criticism.

On the 26th, HL Holdings held an extraordinary board meeting in the afternoon and revoked the decision announced on the 11th to donate 470,193 treasury shares. The method and timing of establishing the foundation that was to receive the treasury shares will be reconsidered later.

Kim Kwang-heon, CEO of HL Holdings, stated, "We apologize and regret that we failed to properly convey the group's true intentions," adding, "We humbly accepted the shareholders' concerns and withdrew the plan to donate treasury shares free of charge."

Previously, on the 11th, HL Holdings decided to donate 470,193 treasury shares, which is 84% of the 560,720 treasury shares held in kind, to the newly established foundation free of charge. Based on the closing price on the 18th, donating treasury shares worth approximately 16 billion KRW free of charge would be recorded as a loss in the company's performance. As the company's overall profit decreases, the earnings per share (EPS), or the value per share, would decline. This directly contradicts the stated purpose of "enhancing shareholder value" when the company acquired treasury shares twice in 2020 and 2021.

Typically, when a company transfers treasury shares to a foundation, it is seen as a 'tactic' to win management disputes. Treasury shares do not have voting rights, but when transferred to a foundation, voting rights are restored. Chairman Jeong Mong-won, the largest shareholder of HL Holdings, holds a 31.58% stake including related parties. Other major shareholders include VIP Asset Management (10.41%), Baring Asset Management (6.59%), and the National Pension Service (5.37%). The shareholding ratio of shareholders other than the largest shareholder is relatively high.

Despite posting poor performance at a level of an 'earnings shock' in the third quarter of this year, HL Holdings shareholders strongly opposed the decision, which contradicted the purpose of enhancing shareholder value. Kim Min-guk, CEO of VIP Asset Management, expressed strong criticism, saying, "As the second-largest shareholder, it is regrettable to be powerless to prevent the company's incomprehensible decision."