News: Proxy adviser ISS recommends LG shareholders reject spinoff plan.
BOSTON (Reuters) – Proxy advisor Institutional Shareholder Services Inc. said LG Corp. should vote against the South Korean company’s plan to outsource five affiliates, arguing that there is no “compelling” reason for the proposed transaction.
LG announced in November that it would spin off a new holding company and transfer its holdings in LG Hausys, LG MMA, Silicon Works, LG International and Pantos to the new entity. This is the recent restructuring in one of the country’s family-run conglomerates as they move on to a new generation.
The US hedge fund Whitebox Advisors, which owns around 1% of LG, rejects the plan and has launched a public campaign to stop it. The spin-off would harm minority shareholders while at the same time solving a problem of family succession.
LG had argued that the spin-off would focus on existing core businesses such as electronics, chemicals and telecommunications services.
Less than two weeks before shareholders are due to vote on the matter at a March 26 meeting, the ISS dismissed the company’s arguments.
“It appears that the proposed transaction has no compelling business justification and does not address the most pressing issues related to Capital management and the huge discount to the net asset value at which shares in the parent company trade, ”the ISS said in a report from Reuters.
Analysts believe that the new holding company, which will be headed by Koo Bon-joon, a son of the LG founder, will eventually be managed by LG Corp. is separated. LG Corp itself is run by Koo Bon-joon’s nephew, Koo Kwang-mo, who took over as chairman of LG Group in 2018 after his father’s death.
The ISS report also looked at family dynamics.
“The statement of post-split shares exchanges between family members has raised suspicions that the proposed transaction is merely aimed at addressing succession problems within the founding family,” the report said.
Reporting by Svea Herbst-Bayliss; Adaptation by Sonya Hepinstall
Original Source © Reuters