IPO delays of major Korean group units to hamper hereditary succession

2022.08.08 13:08:29 | 2022.08.08 13:52:37

[Source: Hyundai Oilbank]이미지 확대

[Source: Hyundai Oilbank]

The chain of IPO setbacks and pullouts by big South Korean conglomerates could hamper their business expansion and hereditary succession schemes.

Among high-profile withdrawals from this year`s IPO pipeline are Hyundai Engineering, SK shieldus, OneStore, Hyundai Oilbank, CJ OliveYoung, and SSG.com.

Hyundai Engineering under Hyundai Motor Group put off its IPO following disappointing book-building results in January. Hyundai Oilbank, refiner under Hyundai Heavy Industries Group, decided to cancel its IPO plan on July 20.

CJ OliveYoung, beauty store chain under CJ Group, has temporary called off its plan to go public this year.

SK shieldus, a security service firm under SK Group, as well as its mobile app store operator OneStore have called off their IPO plan after dismal book-building outcomes in May.

Industry heavyweights Hyundai Engineering, Hyundai Oilbank, and CJ OliveYoung could have been blockbusters if they had gone public amid the IPO frenzy during the pandemic period with lush liquidity.

The IPOs also could have served the interests of business groups under family ownership. Large shareholders of a company often use an IPO of unlisted subsidiary as a way to raise capital for carrying out hereditary succession scheme.

[Source: CJ OliveYoung]이미지 확대

[Source: CJ OliveYoung]

In the case of CJ Group, two children of CJ Group’s Chairman Lee Jay-hyun have combined 15.25 percent stake in CJ OliveYoung. The two offsprings would want to raise more money to secure shares of the group’s holding company and pay for inheritance tax with the IPO of CJ OliveYoung bringing in more proceeds when they sell their existing shares.

The case is similar for Hyundai Engineering and Hyundai Oilbank.

Hyundai Motor Group Chairman Chung Eui-sun and his father and Honorary Chairman Mong-Koo Chung had planned to sell 5.34 million shares and 1.42 million shares, respectively, in Hyundai Engineering through IPO. They were expected to use IPO proceeds to acquire more of Hyundai Mobis, which could help further strengthen their grip over Hyundai Motor Group.

Hyundai Oilbank has HD Hyundai and Asan Nanum Foundation as its two largest shareholders, holding combined 74.10 percent stake. The largest shareholder of holding company HD Hyundai is Chung Mong-joon, honorary chairman of Asan Nanum Foundation with a 26.60 percent stake. His son and president and CEO of Hyundai Heavy Industries Group, Chung Ki-sun, owns a 5.26 percent stake in Hyundai HD.

The delay in IPOs of those companies could push back hereditary succession by three to four years, Lee Sang-hun, researcher at Hi Investment & Securities, projected.

By Pulse

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