POSCO to split off steel business, become holding company

By Baek Byung-yeul

POSCO has decided to split off its steel business and become a holding company, in a bid to find new growth engines and enhance shareholders' value, the steelmaking giant said Friday.

As a result of the decision, made at a board meeting, the newly established POSCO Holdings will be responsible for group-wide investment and new business development.

The holding company will own a 100 percent stake in its steel business unit. The company will hold a shareholders' meeting on Jan. 28 to obtain approval from shareholders for this transition to a holding company system.

The business overhaul has long been anticipated among market players, as the company thought that it had been undervalued despite its strong performance. Even when the company tried out new businesses, such as for secondary battery materials, it saw its growth potential being devalued, due to the perception that it is involved in steel only.

Regarding the background for the business overhaul, POSCO said that it has been seeking various ways to sustain growth and enhance corporate value in the rapidly changing business environment, such as by transitioning to low carbon emissions.

To this end, the company decided that it was essential to discover future business opportunities and switch to a holding company structure dedicated to the management of such investments, it said.

With this reorganization, POSCO said that it plans to establish a balanced growth system by choosing steel, secondary battery materials, lithium, nickel, hydrogen energy, infrastructure and food businesses as core items. By enhancing the competitiveness of each business, POSCO Group also aims to more than triple its corporate value by 2030.

"There have been several discussions on the transition to a holding company system in the past, but there is a consensus among the board members that now is the best time to reorganize the business structure while revolutionary changes that we have not experienced in the past are taking place,” a company official said.

"We will strengthen our expertise by business and discover and foster new business opportunities in the future under the holding company system, as well as enhance corporate value and pave the way for the group's sustainable growth by creating synergy between group-wide projects," the official added.

POSCO started as a state-run company and was privatized in 2000. Its largest shareholder is the National Pension Service, owning a 9.74 percent stake. The industry view is that chances are low that the National Pension Service will oppose POSCO's restructuring plan in January's shareholders meeting, given that the government has encouraged conglomerates to improve their governance structures through transitioning to a holding company system.

On the announcement, investors showed a negative response as its stock price closed at 281,500 won ($238), down 4.58 percent from Thursday.