[Why&Next]SPC Group Restructures Governance... Why Did the Second Son Take Out a Stock-Backed Loan?

SPC to Complete Physical Division of Paris Croissant Within the Year
Governance Restructuring Accelerates... Transition to 'Third-Generation Owner System'

As SPC Group embarks on a restructuring of its governance, Chairman Hur Youngin’s second son has secured liquidity through a stock-backed loan. SPC Group has recently faced a series of simultaneous setbacks, including repeated employee fatalities, allegations that Chairman Hur Youngin attempted to break up the labor union, and accusations of unfair practices toward Baskin Robbins franchisees. In response, the group is transitioning to a holding company structure in search of a breakthrough. With expectations that the succession process for the two sons will accelerate through this governance overhaul, attention is now focused on how the owner family will utilize their funds.

According to the electronic disclosure system on December 21, Hur Heesoo, President of SPC Group, borrowed 8.5 billion won from Hana Securities on November 28 by pledging 280,000 shares of SPC Samlip, a core subsidiary of the group, as collateral. President Hur holds an 11.94% stake (1.03 million shares) in SPC Samlip, making him the third-largest shareholder after Paris Croissant, which serves as the group’s de facto holding company, and his older brother, Vice Chairman Hur Jinsu.

This loan was taken out as SPC Group is set to conduct a physical division of Paris Croissant into business operations and investment/management divisions within the year. Paris Croissant, which operates the bakery franchise Paris Baguette, is a family-owned company with the Hur Youngin family holding 100% of its shares. It sits at the top of the group’s governance structure, holding stakes in about 30 affiliates, including over 40% of SPC Samlip, 100% of SPL, 100% of Secta9ine, 10% of Shany, and shares in BR Korea.

Following the physical division, SPC Group plans to establish a holding company structure by retaining Paris Croissant’s business division as a wholly owned subsidiary and merging it with the investment division affiliate SPC. In October, Paris Croissant amended its articles of incorporation to add “holding company business.”

'Owner Risk' and Safety Issues... Succession Enters Full Swing

The industry sees this governance restructuring as the start of a full-scale succession process for the group. SPC Group has been facing prolonged legal risks, with Chairman Hur Youngin being summoned to court 24 times this year alone over allegations of unfair labor practices related to union-busting, including pressuring bakers to withdraw from the Korean Confederation of Trade Unions.

Additionally, another fatal accident occurred at an SPC affiliate this year, intensifying calls for responsible management and raising safety concerns across the group. Given the recurring owner risk, there is a prevailing view that the need for structural reforms to enhance management predictability has influenced the timing of the succession process.

Furthermore, mounting competition in the food service industry and the pressure for large-scale investments required for global and digital transformation have also played a role. In this increasingly complex business environment, clarifying the speed and accountability of key decision-making has made succession structure reform an urgent and unavoidable task.

Industry insiders commented, “With repeated safety incidents and ongoing union-busting trials shaking internal and external trust, resolving owner risk and transferring control in a stable manner has become the group’s most pressing issue. The succession process has taken on the character of a ‘managed succession’ aimed at ensuring a stable transfer of management rights.”

The Core Succession Tool: 'Share Swap'... The Listed SPC Samlip as a Variable

The holding company structure simplifies the group’s hierarchy, making equity succession easier. After the split, the most likely succession method is for Chairman Hur Youngin to transfer his Paris Croissant shares to his two sons through a share swap or in-kind contribution. In this process, SPC Samlip shares are considered a key tool, as the two brothers each hold significant stakes, making it advantageous for structuring a share exchange.

Looking at SPC Samlip’s ownership structure, Chairman Hur holds 4.64%, while Vice Chairman Hur Jinsu owns 16.31% and President Hur Heesoo holds 11.94%. Since the brothers’ combined stakes are high and the gap between them is not large, there is a realistic scenario in which their SPC Samlip shares are swapped for Paris Croissant shares to adjust control.

Previously, in 2014, Vice Chairman Hur Jinsu and President Hur Heesoo increased their Paris Croissant stakes by participating in a paid-in capital increase worth 47.6 billion won, exchanging their SPL and SPC shares for Paris Croissant shares.

However, the fact that SPC Samlip is a listed company is an important external variable. Transfers of listed company shares involve complex procedures, including disclosure requirements, market price evaluations, and protection of minority shareholders, making them more restrictive than equity adjustments among unlisted affiliates. Since market reactions must also be considered, the method and speed of share transfers may be affected. For this reason, there is speculation that President Hur Heesoo may secure cash by using his SPC Samlip shares as collateral to purchase Paris Croissant shares held by Chairman Hur Youngin.

Currently, Paris Croissant is 100% family-owned, with Chairman Hur holding a 63.31% stake, Vice Chairman Hur Jinsu at 20.33%, President Hur Heesoo at 12.82%, and Chairman Hur’s wife, Auditor Lee Mihyang, at 3.54%. The key to succession will be how Chairman Hur, as the largest shareholder, chooses to transfer his stake.

Yonhap News Agency

Will the Brothers Split the Affiliates? The Third Generation System Is Essentially in Operation

Some observers suggest that this split could lead to a division of affiliates between the brothers, citing the precedent set by SPC founder the late Honorary Chairman Hur Changsung, who entrusted Samlip Foods to his eldest son and Shany to his second son. The current business structure, divided into bakery/global (Hur Jinsu) and food service/digital (Hur Heesoo), is seen as supporting this possibility. Notably, BR Korea is the only affiliate in which Paris Croissant has no direct investment, making it likely to become President Hur Heesoo’s personal management base in the future. The ownership of BR Korea consists of Hur Youngin and three others (66.7%) and Baskin Robbins International LLC (33.3%).

The differentiation of roles between the brothers is also evident in organizational management. This year, Vice Chairman Hur Jinsu and President Hur Heesoo were each promoted, officially signaling that the management axis has already shifted to the two sons. As each is firmly in charge of his own business area, it is widely regarded that the third-generation management system is already effectively in operation.

An industry source commented, “If the split formalizes the brothers’ roles, decision-making authority within the board of directors and major affiliates is likely to become even more clearly divided. Since the third-generation management system is already functioning in practice, the group appears to be preemptively preparing channels for share transfers to accommodate various scenarios, including joint management and affiliate separation.”

However, with the Fair Trade Commission recently investigating Baskin Robbins for violations of the Franchise Business Act and the National Tax Service conducting a tax audit, it remains to be seen whether the governance restructuring can be completed within the year. An SPC representative stated, “This split is intended to efficiently reorganize the previously mixed business divisions and simplify the decision-making system to enhance management efficiency. We plan to complete the physical division within the year.”