Proxy adviser ISS recommends LG shareholders reject spinoff plan

LX Hausys

12/03/2021 23:57

By Svea Herbst-Bayliss
    BOSTON, March 12 (Reuters) - Proxy adviser Institutional
Shareholder Services Inc. said LG Corp.  003550.KS  shareholders
should vote against the South Korean company's plan to spin off
five affiliates, arguing there is no "compelling" reason for the
proposed transaction.
    LG announced in November that it would spin off a new
holding company and transfer its holdings in LG Hausys, LG MMA,
Silicon Works, LG International, and Pantos into the new entity,
marking the latest reorganization at one of the country's
family-led conglomerates as they pass to a new generation.
    U.S. hedge fund Whitebox Advisors, which owns roughly 1% of
LG, opposes the plan and has mounted a public campaign to stop
it, saying the spinoff would hurt minority shareholders while
aiming at resolving a family succession issue.  urn:newsml:reuters.com:*:nL4N2IV018
    LG had argued that the spinoff would let it focus on
existing core businesses such as electronics, chemicals, and
telecommunications services.
    Less than two weeks before shareholders are expected to vote
on the matter at a meeting on March 26, ISS rejected the
company's arguments.
    "It appears that the proposed transaction lacks a compelling
business justification and does not address the most pressing
issues related to capital management and the enormous discount
to NAV at which shares of the parent company trade," the ISS
said in a report seen by Reuters.
    Analysts expect the new holding firm, to be headed by Koo
Bon-joon, a son of LG's founder, will eventually be separated
from LG Corp. LG Corp itself is led by Koo Bon-joon's nephew Koo
Kwang-mo, who took over as LG Group chairman in 2018 after his
father died.
    The ISS report also addressed the family dynamics.
    "The statement about the post-spinoff exchange of shares
between family members has fueled suspicions that the proposed
transaction is merely aimed at addressing issues with succession
planning inside the founding family," the report said.

 (Reporting by Svea Herbst-Bayliss
Editing by Sonya Hepinstall)
 ((svea.herbst@thomsonreuters.com; +617 856 4331; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))