Posco envisages steel industry spin-off to transform into a holding structure
South Korea’s leading steelmaker Posco is exploring an option to become a holding company by splitting its main steelmaking business into a wholly-owned subsidiary under the holding company that would focus on non-steel activities and investing in new ones. engines of growth.
According to several sources in the circle of conglomerates on Wednesday, Posco will discuss the issue of the transformation into a holding structure during a board meeting scheduled for December 10. The agenda requires shareholder approval, and the next shareholder meeting is scheduled for next January. year.
Posco is considering the option of improving company and shareholder value in response to the rapidly changing business landscape driven by the global net zero movement and the acceleration of technological innovation, said an anonymous official at Posco, adding that the company will announce details upon confirmation. .
Jeon Joong-seon, vice president of strategic planning at Posco, led a task force to look into the holding company issue, sources said.
The most possible scenario is for Posco to separate its main steel business into a subsidiary under a new investment holding company, tentatively named Posco Holdings. The new holding entity will hold a 100 stake in the steel business subsidiary after a spin-off and will focus on investing in new growth and green businesses such as those involving secondary battery materials.
In this scenario, Posco Holdings will be at the top of the management structure with units under its arm – the fully owned Posco steelmaking unit, Posco Chemical (59.72%), Posco International (62.91 %), Posco Engineering & Construction (52.8%), and Posco Énergie (89.02 percent).
The change is expected to help simplify the decision-making process in the steel group and accelerate the growth of each new growing company, a move that should improve the overall value of the company, said an anonymous official in the conglomerate circle. .
But some industry observers expect very limited impact from the plan because Posco, which is at the top of the group’s management decision-making structure, already plays the role of a commercial holding entity, an anonymous expert from the structure of the company.
Some predict that if the split steel unit maintains its unlisted position, the holding entity could benefit from a better valuation of the other subsidiaries.
Therefore, the company is also exploring another option, the stock split that allows existing shareholders to own shares in both the company and investment entities. The bond between the holding company and the business entity will weaken, but the value of the holding company without the steel business will improve. The value of companies that have carried out capital splits this year has increased – that of F&F, SK Telecom and the former Daelim Industrial.
Posco, however, would need additional procedure to meet the requirements to move to a holding company structure through an equity split, as Posco Holdings’ stake in Posco after the equity split would be. 13.26 percent, which is less than the 30 percent required as part of the country’s fair trade. act.
Posco shares were down 0.18% to 276,500 won ($ 234) on Thursday morning.
By Han Woo-ram and Lee Eun-joo
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