BGF to raise 1 tril. won to solidify chairman Hong's control

By Park Hyong-ki

BGF shares continued to tumble following its recent announcement it will issue new shares to raise over 1 trillion won to turn itself into the group’s holding company.

BGF will use the capital to acquire a 30 percent stake in BGF Retail, the operator of CU, one of the biggest local convenience store chains. CU has a 33 percent market share here. The group also runs advertising and golf businesses.

This equity acquisition will further solidify BGF Chairman Hong Suk-jo’s control in the holding company and its key retail subsidiary in a vertical structure.

Hong holds a 31.8 percent stake in BGF Group, as well as the same amount of equity in BGF Retail. The capital transaction is likely to involve BGF acquiring Hong’s 30 percent stake in BGF Retail as part of a process to turn into a holding company. Hong and his family have a controlling 50 percent stake in BGF.

The antitrust rules require a holding company to own more than a 20 percent stake in its listed subsidiary.

“To meet the requirement for a holding company, BGF will acquire shares in BGF Retail and make it its subsidiary,” BGF said in a regulatory filing.

The chairman is a former prosecutor who became the chief executive about 10 years ago when CU was then known as Family Mart.

BGF changed the store’s name to CU after its contract to run the Japanese Family Mart brand expired in 2012.

Hong is the younger brother of Hong Seok-hyun, former chairman of JoongAng Media Group.

His eldest son Jeong-guk was promoted to vice president in October last year.

Hong Seok-hyun and his younger sister Ra-young sold part of their BGF Retail shares last year in an apparent move to give their brother more control of the retail group.

Their older sister is Ra-hee, wife of Samsung Chairman Lee Kun-hee.