CJ Cheiljedang, the food arm of CJ Group, will secure 20 percent of shares of the group’s logistics unit to become a sole affiliate under CJ Corp., the holding company of the conglomerate, it said Tuesday.
The logistics arm of CJ Group will also merge with the conglomerate’s construction unit to create synergy in building logistics centers and other related businesses, it added.
The company has decided to secure 20.1 percent of CJ Logistics’ shares currently held by KX Holdings, formerly known as CJ GLS, to simplify the group’s governance structure amid regulatory pressure on South Korean chaebol to improve transparency in their corporate structures.
The Moon Jae-in government has been seeking ways to revise the fair trade law by requiring holding companies to increase their shares of affiliates, as part of chaebol reform. At the moment, holding companies are required to hold more than 20 percent of shares of affiliates listed on the market and 40 percent of unlisted subsidiaries.
The Moon government is reportedly reviewing ways to increase that mandatory shareholding portion by 10 percentage points each. However, conglomerates have raised concerns that such changes in the law could cost trillions of won.
CJ said the latest decision was made in line with the government’s move to seek revision of the fair trade law.
After taking KX Holding’s shares of CJ Logistics, CJ Cheiljedang’s stake in the logistics company, which will be merged with CJ Engineering and Construction, will increase to 40.2 percent.
The price of the merger will be one CJ Logistics share for every 0.54 CJ E&C share, the logistics company said in a regulatory filing.
The company will absorb the builder by giving 529,398 shares worth 80.3 billion won ($73.9 million) to CJ Corp., which holds a 99.9 percent stake in CJ Engineering and Construction.
The logistics company will take businesses of the builder after the merger, it added.
CJ expects to combine the builder’s capacity in warehouse construction with the logistics company’s know-how in distribution services.
Demand for distribution centers in and out of the country is growing, officials said. CJ Logistics is building a logistics hub in Gonjiam, Gyeonggi Province, to handle the growing volume of door-to-door delivery services.
Launched in 1995, CJ E&C saw 642 billion won in sales with 12.2 billion won of operating profit last year.
By Cho Chung-un (email@example.com)