Family succession at major conglomerates put on hold due to lackluster IPO market

The Korea Times

The Korea Times

Business

Wed, November 29, 2023 | 07:09

Companies

Family succession at major conglomerates put on hold due to lackluster IPO market

Posted : 2022-08-08 16:22

Updated : 2022-08-08 21:30

CJ CheilJedang executive Lee Sun-ho, the oldest son of CJ Group Chairman Lee Jay-hyun, appears in the Seoul High Court in this February 2020 file photo. Newsis

Heirs of CJ, Hyundai Heavy, Hyundai Motor miss opportunity to secure cash

By Park Jae-hyuk

The ongoing sluggish state of the stock market has put brakes on the plans of some chaebol heirs to tighten their grips on group management through earnings from the initial public offerings (IPOs) of key affiliates, according to industry officials, Monday.

Since worsening investor sentiment has forced most conglomerates to retract their plans to list their affiliates on the stock market, the chaebol heirs have had no choice but to wait for the next opportunity to secure cash to pay taxes on shares that they will inherit from their fathers.

The latest examples of such heirs are CJ Group Chairman Lee Jay-hyun's son and daughter ― CJ CheilJedang executive Lee Sun-ho and CJ ENM executive Lee Kyung-hoo.

Earlier this month, CJ Olive Young abruptly announced that it halted the IPO procedure, without disclosing when it will be resumed.

The health & beauty (H&B) store chain had been pushing ahead with plans for its debut on the Seoul bourse by the end of this year, after hiring Mirae Asset Securities and Morgan Stanley as the lead underwriters, and KB Securities and Credit Suisse as co-underwriters last November.

However, it ultimately decided to drop the plan, citing the recent market conditions that have made it difficult for the company to gain a good evaluation.

Although CJ Group has continued to deny speculation that Olive Young's IPO was aimed at bolstering managerial succession, most securities analysts have pointed out that it was obvious that the IPO was intended to help the chairman's children secure cash to acquire additional shares in the group's holding firm, CJ Corp.

According to Olive Young's recent regulatory filing, the chairman's son holds an 11.04 percent stake in the H&B store chain, while the daughter owns a 4.21 percent stake.

"Given that the chairman's leadership remains undiminished, CJ Group seems not to press forward with the managerial succession until Olive Young's valuation goes up," an analyst from a local securities firm said on condition of anonymity.

Hyundai Motor Group Executive Chair Chung Euisun, left, listens to his cousin, HD Hyundai CEO Chung Ki-sun, during the CES 2022 event in Las Vegas in this January file photo. Courtesy of Hyundai Heavy Industries Group

Another chaebol heir affected by the lackluster IPO market was HD Hyundai CEO Chung Ki-sun, who holds a 5.26 percent stake in the holding company of Hyundai Heavy Industries (HHI) Group.

The oldest son of Asan Foundation Chairman Chung Mong-joon, the largest shareholder of HD Hyundai, was initially expected to strengthen his control over the group, once Hyundai Oilbank goes public, because HD Hyundai is the largest shareholder of the oil refiner.

However, Hyundai Oilbank abruptly cancelled its IPO last month, even though the company had received a preliminary approval from the Korea Exchange for its debut on the benchmark KOSPI market this year.

"As the recent market conditions have made it difficult for our company to be evaluated properly despite its solid earnings, we decided not to pursue the IPO," a Hyundai Oilbank official said last month.

The HHI Group heir's cousin, Hyundai Motor Group Executive Chair Chung Euisun, faced a similar problem, when Hyundai Engineering cancelled its KOSPI listing earlier this year.

The executive chair, who holds an 11.7 percent stake in Hyundai Engineering, had planned to sell 5.34 million shares, which could have been worth up to 400 billion won ($307 million), if Hyundai Engineering had gone public and its IPO price had been set at the top end of the range.

Market insiders had therefore expected him to use the money to acquire an additional stake in Hyundai Mobis, which has served as the automotive group's de facto holding company, or pay taxes on the company's shares that he will inherit from his father, Hyundai Motor Group Honorary Chairman Chung Mong-koo.

pjh@koreatimes.co.kr