Right Time for Spin-offs
It has been found that the Hyosung owners including honorary chairman Cho Seok-rae and chairman Cho Hyun-joon have continued to buy the stocks of their company since the beginning of this year and their shareholding in the company recently reached 37.48%. Experts point out that this is to adopt a holding company structure in the near future.
During his election campaign, South Korean President Moon Jae-in promised to adjust the minimum required shareholding of a holding company in its subsidiary from 20% to 30% and its maximum allowable debt ratio from 200% to 100%. Hyosung currently has few problems in satisfying the former and its debt ratio has been almost halved to 120% since the end of last year.
Tax benefits based on the Restriction of Special Taxation Act, which expire next year, are another factor related to the likelihood of the adoption of the structure. According to the act, capital gain tax payment by a company adopting the structure is indefinitely postponed until stock disposal when it comes to investment in kind by a major shareholder.
Still, Hyosung officially said that it is not considering adopting a holding company structure at all and nothing can be said about what decision the top management will make in the future.
Nevertheless, many stock market experts are saying that Hyosung’s adoption of a holding company structure is almost an established fact. “Hyosung’s performance has improved to a large extent and now is the right time for the company to adopt the structure after a spin-off like Hyundai Heavy Industries did earlier,” said HI Investment & Securities.