CJ Group's succession plan picks up speed
From left are CJ Group Chairman Lee Jay-hyun, his son Sun-ho and daughter Kyeong-hoo. Korea Times file
By Nam Hyun-woo
CJ Group Chairman Lee Jay-hyun has handed over his shares worth 122 billion ($102 million) in the group's holding firm to his son and daughter in an apparent bid to transfer management control of the retail giant to his offspring.
According to regulatory filings on Tuesday, Lee gave 920,000 convertible preferred shares in CJ Corp. each to his daughter Kyeong-hoo and son Sun-ho. The combined worth of the 1.84 million shares reaches 122 billion won.
The convertible shares will be exchanged to common stocks with voting rights in 2029, which will become a 2.7 percent stake in CJ Corp. for each of the offspring. This will give the younger Lees greater control in Korea's 14th-largest conglomerate which has 445 units across the world.
In April, the group kicked off its management succession process by splitting the businesses of a key unit in the group's shareholding structure, which will lead Sun-ho and Kyeong-hoo to have 2.8 percent and 1.2 percent stakes in CJ Corp., respectively, on Dec. 27.
When the convertible shares are exchanged in 2029, Sun-ho and Kyeong-hoo's current stakes will first be inched down to 2.4 percent and 1.1 percent, respectively. Then the converted shares will each add 2.7 percent stakes, leaving Sun-ho with 5.1 percent and Kyeong-hoo 3.8 percent.
This transaction reportedly involves 70 billion won in taxes, and CJ Group said “it chose a legitimate transaction which involves tax payment.”
As Sun-ho is expected to have a greater stake in CJ Corp., industry officials said CJ Group appears to be promoting the 29-year-old as the group's heir, despite setbacks stemming from his drug scandal.
On Oct. 24, the Incheon District Court sentenced Sun-ho to a three-year prison term suspended four years on charges of drug smuggling.
CJ Corp.'s articles of association do not prohibit people with criminal records from becoming members of its board, thus there is no rule banning Sun-ho from becoming a CJ Corp. board member even though he was convicted.
Along with the management succession, CJ Group has recently been paying more efforts to improve its financial status rather than expand.
Recently, CJ CheilJedang unloaded a number of properties including 103,000 square meters of idling land in Gangseo-gu and a site for a plant in Guro-gu, both in Seoul, at 850 billion won and 230 billion won respectively.
This came after CJ CheilJedang accumulated massive net borrowings, which totaled 11 trillion won in the first half of this year. This accounts for the majority of CJ Group's total of 13 trillion won.
CJ Group said, however, the property unloading has “nothing to do with succession” and is aimed at “securing financial prudence.”