POSCO Int'l to absorb energy unit to move up E&P value chain

POSCO International Corp., the trading unit of Korean steel giant POSCO, will merge with its unlisted affiliate POSCO Energy Co. to reinforce its energy exploration and production (E&P) value chain.

The two subsidiaries of POSCO Holdings Inc., POSCO Group's holding company, approved the merger plan at their respective board meetings on Friday.

The merger ratio between POSCO International and POSCO Energy has been set at 1 to 1.16.

The companies aim to wrap up the merger by Jan. 1 after securing approval at their shareholders’ meetings in November.

In line with the merger ratio, POSCO International, listed on Korea’s main bourse, will issue 46.78 million new merged shares to POSCO Energy’s parent, POSCO Holdings, they said.

Following the merger, POSCO Holdings’ stake in POSCO International will rise from 62.9% to 70.7%

New POSCO International shares will start trading on the country's Kospi market on Jan. 20.

On Friday, shares of POSCO International closed up 9.3% at 2,100 won after the announcement, outperforming the broader Kospi market’s 0.2% gain.

ONE OF THE GROUP’S MAIN PILLARS

“We’re pursuing the merger in line with our strategy to grow POSCO International as one of our group’s main pillars,” said a POSCO Holdings official. “We will continue to invest heavily in POSCO International, which in turn will boost the group’s enterprise value.”

The merged entity will have more than 40 trillion won ($31 billion) in annual sales, he said.

Last year, POSCO International posted 34 trillion won in sales with an operating profit of 600 billion won.

Since 2013, POSCO International, formerly Daewoo International, has taken part in natural gas exploration and production projects across Southeast Asia, including in Malaysia and Myanmar.

The merging of the companies is expected to help POSCO Group strengthen its LNG supply chain from imports, liquefaction and storage to gas supply to consumers.

While POSCO International imports liquefied natural gas (LNG), POSCO Energy operates an LNG terminal, a facility for regasifying the liquefied fuel, in Gwangyang, 300 km south of Seoul.

TREASURY SHARE CANCELLATION

Meanwhile, POSCO Holdings said on Friday it will retire 2.62 million treasury shares worth 672.2 billion won, or 3% of its total outstanding shares, to enhance shareholder value.

The company last canceled its shares in 2004.

The cancellation of treasury shares is a shareholder-friendly policy aimed at improving the company’s return on equity (ROE) and price-earnings ratio.

POSCO Holdings said the share cancellation will be completed on Aug. 22.

Write to Ik-Hwan Kim at lovepen@hankyung.com
In-Soo Nam edited this article.