US hedge fund launches campaign against planned LG spin-off

SEOUL / BENGALURU (Reuters) – US hedge fund Whitebox Advisors LLC has publicly opposed a plan to split South Korean LG Corp, saying the plan “sacrifices minority shareholder returns in order to resolve family succession issue “.

LG Corp announced in November that it would transform five subsidiaries into a new holding company next year, the latest reorganization of one of South Korea’s family conglomerates as they transition to a new generation of executives.

Analysts expected the new holding company, headed by Koo Bon-joon, a son of LG founder, to eventually separate from LG Corp. LG Corp itself is run by Koo Bon-joon’s nephew, Koo Kwang-mo, who took over as Chairman of the LG Group in 2018 after his father’s death.

“The spin-off does nothing to address LG’s most pressing problem, which is the unprecedented discount the company is trading at against its assets and, as a result, a lower return for shareholders,” said Whitebox, which manages around $ 5.5 billion in assets.

“We are deeply dismayed that the alleged justification for this transaction is to support Koo Bon-joon in the development of its own business group,” he added.

Whitebox called on LG to stop current plans and come up with a new spin-off that “maximizes value for all shareholders”, create a corporate governance committee and implement a capital management plan.

LG said shareholder value can be enhanced through the split and independent management of companies that have low strategic priority in the current LG group but have high growth potential, which will allow their re-evaluation by the market.

It will also offer options to shareholders, including a share buyback, LG said in a statement.

Whitebox did not say how many LGs it owns, only that it is a “long-term shareholder” who has sought to contact LG’s board and management for the past two years. The shareholders’ meeting for the proposal is expected at the end of March.

LG Corp shares were flat in morning trading, compared to a 0.3% drop in the broad market.

(Reporting by Shradha Singh in Bangalore and Joyce Lee in Seoul; editing by Uttaresh.V and Christopher Cushing)

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