이 기사는 2022년 05월 11일 08:12 thebell 에 표출된 기사입니다.

Hankook & Company Group chairman Cho Hyun-bum has been given his father’s stake in Hankook Tire & Technology, the conglomerate’s crown jewel, triggering a huge gift tax bill of over 120 billion won ($94 million).

Cho Yang-rai, honorary chairman of the conglomerate, handed over some seven million shares in the tire company to his second son on April 27, according to a regulatory filing on May 3.

The gifted shares were worth approximately 242.5 billion won based on the stock’s closing price on April 27. After the share gift, chairman Cho’s stake increased to 7.73% from 2.07%, becoming the company’s second largest shareholder only behind Hankook & Company, the conglomerate’s holding company, which holds a 30.67% stake.

The handover of the shares is seen as the completion of the family-controlled conglomerate’s succession plan. Cho Hyun-sik, former vice chairman of Hankook & Company and the honorary chairman’s first son, stepped down from all positions within the conglomerate and established his own investment holding company named MW Holding.

The share gift will trigger a tax bill of over 120 billion won for Cho Hyun-bum given the highest marginal tax rate of 50% for the amount exceeding 3 trillion won. He has to report the gifted shares to tax authorities within three months from the date of gift receipt.

Cho may settle the bill in six installments over five years under South Korean law. It is likely Cho will finance the tax liability by taking out loans backed by his shares, like the chairman did when he purchased a 23.59% stake in Hankook & Company from his father for 244.7 billion won two years ago, industry experts said. Of the transaction amount, 222 billion won was raised through loans with his 29 million shares in the holding company pledged as collateral.

Now the number of his pledged shares has reduced by a third to some 20 million and his stake in Hankook Tire & Technology also increased, giving the chairman greater flexibility to use his shares in the two companies as collateral for additional loans.

However, more loans will increase his interest burden. Cho currently has 225 billion won in outstanding loans backed by his shares in Hankook & Company and Hankook Tire & Technology, with the annual interest burden of about 8 billion won.

His salary income and dividends from the two companies are the main funding sources to pay interest. Cho took his annual salary of some 1.5 billion won from Hankook & Company last year. However, the conglomerate is currently in the cost reduction mode, cutting its executive compensation by 20%.

“Chairman Cho will pay the gift tax in accordance with the legal procedures,” an official at Hankook & Company Group said. (Reporting by Su-jin Yoo)