이 기사는 2021년 12월 13일 08:06 thebell 에 표출된 기사입니다.

South Korean steel giant Posco is likely to separate its steel business via a split-off in its transition to a holding company, probably in order to save the cash needed to buy additional shares in a newly created entity if it opts for a spin-off, according to industry sources.

Posco’s board of directors will vote on a shift to a holding company system in a meeting scheduled on December 10. If approved by the board, the proposal is subject to shareholder approval which will be sought at a general meeting in January.

The board will also decide on the method of separating the company’s steel business. A source familiar with the company’s plans said that Posco considered several options and is likely to opt for a split-off over a spin-off.

If the separation occurs through a spin-off transaction, Posco, which will become a holding company, will issue shares of the newly created entity to its existing shareholders on a pro rata basis. Meanwhile, given treasury shares held by the company, Posco will own a 13.26% stake in the new entity.

However, the country’s revised antirust rules, effective on December 30, 2021, require a holding company to own 30% or more of its subsidiaries, up from the current 20% threshold. This means Posco needs to raise its stake in the new entity by about 17% in a two-year grace period.

The purchase of additional shares in the new entity is estimated to cost 3 trillion won to 4 trillion won, which seems affordable for Posco when considering that its operating profit is expected to exceed 9 trillion won for this year.

But Posco reportedly wants to minimize the cash outflow at a time it is actively searching for new business opportunities in areas such as secondary battery materials and hydrogen beyond its core steel business.

Even if Posco’s holding in the new entity grows to 30%, the ownership stake is small compared to its holdings in other subsidiaries, which could be another reason that Posco would not prefer the spin-off method. At the end of September this year, Posco owns 56.87% of Posco Coated & Color Steel, 59.72% of Posco Chemical, 62.91% of Posco International and 89.02% of Posco Energy.

In contrast, in a split-off process, the new entity will become Posco’s wholly owned subsidiary. Posco also could raise funds by selling some of its shares in the new entity by taking it public in the future, although it is said that Posco intends not to list the new entity in case it chooses to proceed with the separation via a split-off.

A split-off of Posco’s steel business would face a strong backlash from the company’s existing shareholders, including the National Pension Service of South Korea, the largest shareholder of Posco with a 9.75% stake. Other major shareholders include depositary bank Citibank with a 7.30% stake and the company’s employee stock ownership plan with a 1.41% stake.

“Nothing has been finalized yet,” said a Posco official. “Final decisions will be made at the board meeting.” (Reporting by Eun-a Jo)