NPS approves POSCO's split into holding firm, steelmaker unit

The National Pension Service (NPS) of Korea, the largest shareholder of POSCO Co., has given its nod to the steelmaking giant’s plan to split into a holding company and a steelmaking company. As six out of nine members of an NPS committee on Jan. 24 approved the split-off, the restructuring plan is gaining momentum.

POSCO Group approved the restructuring plan at its board meeting last December. The move aims to grow new sectors such as secondary batteries and hydrogen, as well as strengthen the holding firm’s role to find new businesses and invest. The holding company will own a 100% stake in the steelmaker unit.

The group said it will not list the steelmaking unit and other businesses, such as hydrogen, lithium and nickel, that will be newly launched by the holding company. This is to address existing shareholder concerns about listing the steelmaker unit, the group stated.

TO PROTECT EXISTING SHAREHOLDER VALUE

NPS, which holds a 9.75% stake in POSCO Co., was the key decisionmaker for the split-off agenda. Besides the world’s third-largest pension fund, global investment firm BlackRock, which has a 5.23% stake in the steelmaker company, is the only shareholder owning more than 5%.

To pass through its extraordinary shareholders’ meeting due on Jan. 28, POSCO should surmount two hurdles – receiving approval from stakeholders that own more than one-third of issued shares; and agreement from more than two-thirds of shareholders attending the meeting.

Foreign shareholders, who together hold as much as a 52.7% stake in POSCO, are poised to approve the restructuring plan as proxy advisers including Institutional Shareholder Services Inc. (ISS), Glass Lewis & Co. and Korea ESG Research Institute are endorsing the plan. NPS’ agreement has raised the likelihood of the plan's success.

The pension service has voted against the split-off of Korean corporates for years – it opposed LG Chem Ltd.’s plan to split off its battery business in 2020 and SK Innovation Co.'s plan to split off its battery unit last year for the reason that the split-off could undermine shareholder value. NPS’ vetoes to these corporate split-offs led to expectations that the pension service would disagree with POSCO’s plan.

NPS’ approval followed POSCO’s decision not to list the steelmaking unit after the split-off to protect existing shareholder value. The pension service also said POSCO’s plan is different from other corporates' previous split-off plans, as the steelmaker is determined to cancel treasury shares in its to-be-launched holding company. Treasury stock retirement will likely shore up POSCO’s share price by reducing the number of shares in circulation, resulting in dividends per share. POSCO holds 13.3% of its own shares.

The group will start reshuffling once the transformation plan is confirmed on Friday. It will then kick off investment in new eco-friendly businesses including lithium, nickel and hydrogen.

Write to Jong-woo Kim and Jung-hwan Hwang at jongwoo@hankyung.com
Jihyun Kim edited this article.