Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
POSCO benchmarking Google-Alphabet model for overhaul
POSCO's office in Seoul Courtesy of POSCO
By Baek Byung-yeul
By Baek Byung-yeul
POSCO Group Chairman Choi Jeong-woo
POSCO is seeking to benchmark Google's establishing of Alphabet as its holding company in its own possible spinoff plan, at a time when the steel giant is diversifying its business portfolio ― currently focused on steel-related industries ― in the direction of eco-friendly energy.
In its spinoff plan, POSCO could be spun off into two companies, one becoming a holding company specializing in implementing group-wide investments and another as a steel business unit, reports said Thursday.
To protect the holding company's value, its steel business unit, which plays a cash-generating role, is expected to remain unlisted, according to local reports.
Regarding the possibility of a business overhaul, a POSCO official confirmed that the company is seeking to restructure itself into a holding company system, but that the details will be decided at its board meeting scheduled to be held on Dec. 10.
“POSCO is considering various measures, such as medium- to long-term growth strategies and management governance restructuring, to enhance future growth and corporate value in response to the rapidly changing business environment,” he said by telephone. If the plan gets approval at the board meeting, POSCO will seek final approval from shareholders at the annual meeting in January.
POSCO has been considering establishing a holding company system in order to aid the rapid expansion of its business portfolio into eco-friendly material businesses, such as secondary batteries and hydrogen fuel cells.
Google set up Alphabet in 2015 as a holding company supervising various business sectors, as the U.S. search giant no longer limited itself to the search engine business. Under Alphabet, there were several subsidiaries, such as Google, artificial intelligence company DeepMind, venture capital GV and robotics software firm Intrinsic.
Investors give Alphabet a high value because it invest in other business units for its future, while Google continues to increase its sales from advertising.
Unlike other Korean conglomerates, such as SK and LG which have been operating holding company systems, POSCO's steelmaking unit has served as the de facto holding company of POSCO Group, owning a large portion of shares in other POSCO affiliates.
By establishing a holding company specializing in investment, POSCO expects that the group will be able to accelerate its expansion into new business areas.
Investors remain quite positive about the business reorganization plans POSCO is now thinking about, as they will give the company momentum to be fairly evaluated in the market. POSCO's shares, which closed at 277,000 won on Wednesday, up 6.13 percent from the previous day, rose 1.62 percent on Thursday to 281,500 won.
POSCO's quarterly operating profit exceeded 3 trillion won for the first time in the third quarter of this year, with the company posting 20.6 trillion won ($17 billion) in sales and 3.1 trillion won in operating profit. But despite its quite impressive corporate performance, the company's stock price has fallen off gradually since the announcement of its third-quarter results.
“Rather than finding ways to secure finance, the spinoff plan seems to reflect the company's preference for new businesses ― such as materials for secondary batteries and hydrogen fuel cells ― to be evaluated separately from its main steel business,” said Bang Min-jin, an analyst at Eugene Investment & Securities, adding that the new company is likely to get a higher valuation.