Korea’s Hyundai Dept. Store drops holding company plan

South Korea’s major retailer Hyundai Department Store Group Co. gave up a plan to split off its core high-end shopping mall affiliate and convert it into a holding company as Norway’s sovereign wealth fund, Institutional Shareholder Service (ISS) and other shareholders reportedly opposed the move amid concerns that it will hurt the competitiveness of the group's cash cow unit.

The withdrawal came as South Korea’s major companies are under attack by activist shareholders, who are exerting ever-increasing clout over critical corporate decisions.

Hyundai Department Store Co. said the agenda for its split-off was rejected at an extra shareholders’ meeting on Friday as only 64.9% of shareholders approved the plan, falling short of a requirement of at least 66.7% for such a move.

“We humbly accept the decision and decided to stop the transition into a holding company system that we had been pushing for,” said the company in a statement. “We have no plan to seek the transition through a split-off again in the future.”

Hyundai Green Food Co., another unit of the group, which sought to spin off and convert into a holding company, won approval for the plan from shareholders. The company plans to proceed with the plan and take steps to boost shareholder value such as cancelations of treasury stocks.

WORRIES ABOUT WEAKER COMPETITIVENESS OF CASH COW UNIT

In September last year, the group unveiled a plan to split off Hyundai Department Store and Hyundai Green Food and convert them into holding companies.

The conglomerate had aimed to establish a new holding firm, tentatively named Hyundai Department Store Holdings, which will have the existing Hyundai Department Store and the group’s cash cow Han Moo Shopping Co. under its umbrella.

Some shareholders opposed the plan to put Han Moo under the holding company, saying the move will hurt its competitiveness, although the group said the plan will boost the unit’s value.

In addition, minority shareholders said the move will boost the control of Group Chairman Chung Ji Sun, a grandson of the late Hyundai Group founder Chung Ju-yung.

The chairman, the No. 1 shareholder of Hyundai Department Store with a 17.09% stake, could have been able to increase his stake through the plan. Hyundai Department Store could have also been able to exercise voting rights with its treasury shares of 6.61%, which carry no such rights if they were swapped into shares in the holding company.

Hyundai Department Store earlier this month unveiled plans to ease shareholder unrest through moves such as the cancelation of treasury shares and raising dividends but failed to obtain sufficient approval to take such action.

Write to Jong-Kwan Park at pjk@hankyung.com

Jongwoo Cheon edited this article.