Hyosung Group took the first step to adopt a holding company structure. It is also expected to strengthen the control of CEO and the heir Cho Hyun-joon, who took office as chairman last year, over the group.
Hyosung Corporation announced that it has decided to spin off into the holding company Hyosung Corporation and four other companies at its board meeting on January 3. Accordingly, the current Hyosung Corporation will be divided into the holding company Hyosung Corporation, which is to be in charge of group-wide investment plans, and four companies – Hyosung TNC, Hyosung Heavy Industries, Hyosung Advanced Materials and Hyosung Chemical.
Under the new structure, Hyosung Corporation will be an operating holding company that manages subsidiaries’ stakes and investments and licenses. Out of its seven performance groups, the textile and trading sector will belong to Hyosung TNC, shipbuilding and construction sector Hyosung Heavy Industries, industrial materials sector Hyosung Advanced Materials and chemical business sector Hyosung Chemical. Other subsidiaries under Hyosung operating at home and abroad will be placed under these corporations based on business relevance. Some will also be placed directly under the holding company.
An official from Hyosung Group said, “The spin-off companies have already secured the world-level competitiveness in each business sector. With the spin-off, Hyosung will adopt the holding company structure and be able to strengthen the transparency of the company’s management and maximize the shareholder value.”
The shift to the holding company structure is expected to strengthen the control of current Chairman Cho Hyun-joon over the group. As the group will be spun off into the holding company and four separate operating companies, Cho will own his stakes in each company at the same level right now. This is because he can exchange his stakes in subsidiaries with that in the holding company or purchase shares of the holding company with funds secured through the sale of his stakes in subsidiaries after subsidiaries are listed in the future.
Hyosung Group took the first step to introduce the holding company system but there are many assignments piled up that it needs to work on. First of all, the group needs to successfully complete the listing of four spin-off firms. The price of Hyosung shares is falling as its performance got worse. The question is how far it can go up before the spin-off companies go public. In addition, the group needs to sell off its subsidiaries managed by Hyosung Corporation, such as Jinheung Enterprise, Hyosung ITX and Shinwha Intertek, as well as its financial subsidiaries and Galaxia affiliates.