News: Proxy advisers ISS, Glass Lewis recommend LG shareholders reject spinoff plan.
BOSTON (Reuters) – Proxy consultants Institutional Shareholder Services Inc and Glass Lewis & Co separately recommended LG Corp shareholders to vote against the South Korean company’s plan to outsource five affiliates, arguing that there was no “compelling” reason for the proposed transaction there.
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 marks the recent reorganization in one of the country’s family-run conglomerates as they are passing 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 has argued that the spin-off would focus on existing core businesses such as electronics, chemicals and telecommunications services.
ISS and Glass Lewis both rejected the company’s arguments about two weeks before shareholders were due to vote on March 26th.
“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 parent company shares trade, ”ISS said in a Reuters report.
Glass Lewis cited “insufficient reasons” for recommending against the deal in his report, released late Friday and seen by 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; Editing by Sonya Hepinstall and Leslie Adler
Original Source © Reuters