Published : Nov. 23, 2016 - 16:32
Corporate split-ups as a means to raise stock value and make corporate governance more transparent have emerged as a recent trend in the South Korean securities market, with food companies the latest to join in.
Orion Group, a leading confectionary manufacturer, decided late Tuesday to split the group into two entities -- Orion Holdings and Orion Corp. -- starting from June 1 next year.
Orion Holdings will be in charge of controlling 17 non-confectionary subsidiaries and making new investments, while Orion Corp. will take responsibility of the production and sales of 15 snack manufacturing affiliates.
Orion Group headquarters in Yongsan, central Seoul (Orion)
Maeil Dairies Industry, on the same day, announced it would turn itself into a holding company and establish a new entity that will oversee the development, manufacturing and sales of dairy products, on March 24.
Last month, Crown, another bakery and snack manufacturer, carried out governance restructuring by setting up a holding company. Major food and beverage businesses -- CJ CheilJedang, Nongshim, Sempio Foods and HiteJinro -- have completed similar conversions within the last few years.
Some observers say the firms’ shareholders are taking pre-emptive measures to protect their leadership before the pending bills related to economic democratization pass though the National Assembly.
“Such moves are seen as a way to prepare inheritance procedures in the mid- and long run, considering that the largest shareholders of the three groups are over 60,” said Kim Dong-yang, an analyst at NH Investment & Securities. “One of the pending bills will impose a new tax on gains from stock split-ups, so the groups are seemingly moving ahead of the bills.”
Orion Group, meanwhile, has issued about 6 million shares at 5,000 won ($4.25) each. The shares will be split into around 60 million shares with a face value of 500 won per share. The group will hold a shareholders meeting on March 31 to approve the split-up.
“After 60 years since its foundation, the group will transform into a new holding company system in order to act more swiftly to market changes,” said Park Seong-kyu, an executive director at Orion Group. “By halving the stock value, investors will get greater opportunities and stock transactions will get a boost.”
Market analysts showed positive reactions to Orion’s announcement.
“The company has been inaccessible by retail investors since the number of shares issued was small,” said Baek Un-mok, an analyst at Mirae Asset Daewoo Securities. “The split-up is less correlated to raising the stock value, but it is true that it will widen investor access to the company.”
Kospi-listed Orion’s shares closed at 700,000 won Wednesday, marking a 3.09 percent jump from the previous trading session. On the Kosdaq, Maeil Dairies’ also jumped 4.74 percent to 40,900 won earlier in the day, before closing at 40,800 won, up 4.48 percent.
Right after the split-up announcement, Crown’s shares reached a new high of 34,950 won on Oct. 26, but has been tumbling to the lowest value of 27,500 won on Nov. 9. The shares closed at 28,800 won Wednesday.
“It is a business management method that is adopted by firms usually after mergers,” said an executive at Korea Exchange. “Such a split-up will not necessarily lead to increase in stock values, but it will help large shareholders enhance their managerial rights and increase transparency in corporate governance.”
By Song Su-hyun (
song@heraldcorp.com)