Many Affiliates of Business Groups Still Rely on Intra-group Deals
The Korea Fair Trade Commission announced on Nov. 16 that the ratio of internal transactions is higher in unlisted subsidiaries than in listed subsidiaries of major business groups and higher in owner-led groups than in ownerless groups. It also said that the ratio tends to be proportional to the owner family stake.
The major business groups the commission covered this time are 71 with total assets of at least five trillion won each. The commission analyzed the 71 groups’ subsidiaries regarding their internal transactions conducted last year.
According to its data, the ratio of internal transactions was 100 percent in 48 groups’ 138 companies and their internal transactions added up to 2.98 trillion won. The 138 companies include 131 of owner-led groups and their internal transactions added up to 2.73 trillion won. The companies are mainly engaged in business service, real estate, financial and insurance service, and publishing.
In Lotte Group, nine subsidiaries showed an internal transaction ratio of 100 percent and the nine conducted real estate investment and management for the other subsidiaries, managed fulfillment centers in their place and provided consulting for them. The number is seven in each of Samsung, SK and SM Groups.
“Last year, 49 business groups’ subsidiaries borrowed 14.6 trillion won from within the groups and financial subsidiaries lent 3.7 trillion won to non-financial subsidiaries,” it said, adding, “The lending amounted to 3.39 trillion won in NH whereas it was 120 billion won in Lotte, 80 billion won in Naver and 50 billion won in Mirae Asset.”
Hyosung, NH, Celltrion and Booyoung lent more money to affiliate persons. For example, Hyosung ASC, Hyosung TNS and Hyosung Goodsprings lent 100 billion won to affiliate shareholders and the money was repaid before contract expiration.
In Kumho Asiana, collateral offering for domestic subsidiaries amounted to 4.58 trillion won. The amount was 3.2 trillion won and 600 billion won in Doosan and Sinokor Merchant Marine, respectively. Kumho Asiana Group’s collateral offering has to do with financial support for Asiana Airlines and Kumho Buslines.