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Shareholder activism

LG shareholders approve spin-off plan amid activist opposition

Mar 26, 2021 (Gmt+09:00)

LX Holdings' logo
LX Holdings' logo

Shareholders of LG Corp., the holding company of South Korea’s fourth-largest conglomerate LG Group, on Friday gave the nod to the company's plan to hive off four affiliates and place them under another holding firm to be launched in May.

About 89.2% of LG Corp.’s shareholders attended its annual general meeting and 76.6% of them supported the plan, making the creation of the new holding firm, tentatively named LX Holdings Corp., official.

LX Holdings, set to launch on May. 1, will have LG International Corp., LG Hausys Ltd., LG MMA Corp. and Silicon Works Co. under its umbrella, while the existing LG Group will continue to have electronics, telecommunications and chemicals units as its flagship subsidiaries.

The approval comes amid objections from minority foreign investors and some activists who said the plan was motivated by LG’s desire to help a member of the founding family start his own business rather than create value for shareholders.

LG’S WIN OVER ACTIVISTS, FOREIGN INVESTORS

US-based hedge fund Whitebox Advisors LLC, which owns roughly 1% of LG Corp., publicly opposed the plan in February and staged a campaign to stop it, saying the spin-off would hurt minority shareholders while aiming to resolve a family succession issue.

Proxy advisers Institutional Shareholder Services Inc. (ISS) and Glass Lewis & Co. also urged shareholders to vote against the spin-off.

LG Group has said the spin-off is designed to increase shareholder value by allowing LG Corp. to focus on other areas of strength.

LG shareholders approve spin-off plan amid activist opposition

Last November, LG Group announced plans to split off its trading arm LG International. and other non-core units into a new business group to be controlled by Koo Bon-joon, uncle of group Chairman Koo Kwang-mo.

The chairman's uncle, Koo Bon-joon, ran LG Electronics Inc. for six years from 2010 and was vice chairman of LG Corp. for three years after that. He is a grandson of LG Group founder Koo In-hwoi and the third son of Koo Ja-kyung, the late honorary chairman. Koo Bon-joon is the second-largest shareholder of LG Corp. with a 7.72% stake.

RENEWED BUSINESS FOCUS

Analysts expect the separation to provide a chance for LX Holdings’ two main affiliates -- LG International and LG Hausys – to be fairly valued by the market.

LX Holdings head Koo Bon-joon
LX Holdings head Koo Bon-joon
LG International is widely expected to change its corporate name to LX Global to widen its business scope to eco-friendly and healthcare sectors.

The trading firm’s top business priority this year is an investment in an Indonesian nickel mine to secure raw materials for electric vehicle batteries.

The company is also seeking business and investment opportunities with LG Energy Solutions Ltd., the country’s largest EV battery maker.

LG Hausys plans to sell its unprofitable projects to concentrate on the value-added construction materials business.

Meanwhile, LG Group said it aims to focus its resources on its battery, auto parts and OLED businesses in coming years.

“With a renewed business focus, we expect to further enhance our competitiveness in the selected sectors,” said group Chairman Koo Kwang-mo.

Write to Jeong-Soo Hwang and Kyung-Min Kang at hjs@hankyung.com

In-Soo Nam edited this article.

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