South Korea’s Dayou Group said Tuesday it plans to undertake a three-to-one reverse stock split of its troubled appliance unit Daewoo Electronics Co. to shore up its finances.

Under the recapitalization scheme, each 3.09 pre-split shares of Daewoo Electronics worth 5,000 won ($4.47) apiece will be combined into one new share, reducing the number of outstanding shares from 36,084,410 to 11,678,059. Equity capital would be trimmed from 180.4 billion won to 58.4 billion won.

This would eliminate Daewoo Electronics’ 122 billion won worth of deficit carried over from last year, according to Dayou Group.

The reverse stock split is effective Aug. 20. Market trading stopped on Aug. 19 and will resume on a split-adjusted basis on Sept. 3.

Dayou Group acquired Daewoo Electronics in February and has since pursued a series of streamlining measures to improve the appliance maker’s bottom line. It sold off Daewoo Electronics’ logistics center in Seongnam and research facility in Bupyeong in the first half of the year to repay its high-interest loan. Sales networks and research centers have also been integrated with another electronics affiliate Dayou Winia Co. for greater synergy.

“Normalization efforts (for Daewoo) have accelerated since it came under the Dayou Group umbrella,” said an official from Daewoo Electronics. “We plan to bolster our finances with the reverse stock split so that we can further step up our marketing activities.”

By Lee Dong-in and Kim Hyo-jin

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