LG's spinoff plan approved

By Kim Yoo-chul

Shareholders of LG Corp. approved an already-announced plan to spin off the group's secondary affiliates involved in everything from trading and construction materials to display semiconductors.

During a shareholders' meeting at LG Corp, the spinoff plan has been approved with 76.6 percent approval, LG Corp. said in a statement.

Last November, LG Corp. said it was planning to separate the group's four affiliates ― LG International, LG Hausys, LG MMA and Silicon Works ― and integrate them into a new entity to be led by former LG Vice Chairman Koo Bon-joon.

Following the approval, the four LG entities will be renamed as LX Holdings, which will also be launched on May 1. Friday's approval also means LG Group will have two holding companies. At the time of the announcement, LG said the separation was aimed at expanding its outreach into batteries, electronics and telecommunications.

But some activist funds had been opposing LG's spinoff plan by claiming it would hurt the best interests of shareholders of LG Corp. and the group's other affiliates.

Specifically, Whitebox Advisors said because the spun-off affiliates will be controlled by Koo Bon-joon, who owns a 46.1 percent stake in LG and is also LG Chairman Koo Kwang-mo's uncle, the spinoff plan was LG's apparent move to treat LG Corp. shareholders as secondary. Also, the Institutional Shareholder Services (ISS) said the combination of the separated affiliates into a single entity isn't looking good in terms of the group's growth potential given the expanded operations of those entities.

“The spinoff seems to have been conceived for the inappropriate purpose of solving a family succession issue between the company's chairman and his uncle,” Whitebox said in an earlier letter. “The spinoff undermines LG's credibility and market position by revealing an insular corporate governance model that treats minority shareholders like second-class citizens.”

LG flatly denied such accusations. In the statement released after the approval, LG Corp. said each of the holding companies will have greater management independence and put more focus on boosting overall corporate value. “The existing holding company LG Corp. will focus more on strengthening the group's presence in electronics, chemicals, batteries, OLEDs and vehicle components. Plus, LX Holdings would explore its best possible chances on how to boost corporate value,” read the release.