SEOUL, Dec. 15 (Korea Bizwire) — LG Group, South Korea’s fourth-largest conglomerate, on Tuesday refuted claims that its planned spin-off of affiliates could undermine shareholder value, saying the move will actually benefit its stockholders.
“We believe our shareholder value will improve since the group can focus on its key businesses, including electronics, chemicals and telecommunications,” LG said.
“Once the split is completed and our growth strategy gets materialized, we think this ‘discount issue’ will be solved.”
Last month, LG Group decided to set up another holding company to prepare for a spin-off of multiple affiliates.
Under the plan, the new holding firm will have LG International Corp., LG Hausys Ltd., LG MMA Corp. and Silicon Works Co. under its umbrella, and will be managed by the board of directors led by Koo Bon-joon, an uncle of current LG Group Chairman Koo Kwang-mo and a younger brother of late LG Group chief Koo Bon-moo.
The move was considered an initial step for Bon-joon to establish his own business group.
LG’s response came out as Whitebox, a U.S.-based hedge fund, recently sent a letter to the board of directors at LG Corp., the group’s existing holding firm, to urge the conglomerate to cease the planned affiliate spin-off.
The U.S. activist fund has been holding an about 1 percent stake in LG Corp.
“LG’s decision to spin off a collection of affiliates in a new holding company was motivated by a desire to help a member of the founding family start his own business rather than to create value for shareholders,” Whitebox said.
“The proposed transaction appears to prioritize family over minority shareholders and is a reason why the ‘Korean Discount’ persists.”
LG Corp. plans to confirm the spin-off plan at its shareholders meeting in March 2021. If approved, the conglomerate will begin operating with two holding companies in May 2021, before Bon-joon officially splits his companies from the group.