Orion Group Chairman Dam Chul-gon's oldest son, Dam Seo-won / Courtesy of Orion

33-year-old faces difficulty raising money to pay for inheritance tax

By Park Jae-hyuk

Orion Group Chairman Dam Chul-gon's oldest son, Dam Seo-won, seems to face obstacles on his way to inheriting the control of the food firm, according to industry officials, Thursday.

Despite his promotion to an executive in the group's latest reshuffle, he still needs a significant amount of money to increase his stake in Orion Holdings, the group's holding firm that serves as the largest shareholder of Orion with a 37 percent stake.

Earlier this week, the 33-year-old was appointed as an executive in charge of business management. His appointment came only a year and five months after he joined the Choco Pie manufacturer. The confectionery firm reportedly established a business management team just before giving him the position of team leader.

He previously worked for Kakao Enterprise after graduating from New York University. He is said to have been involved in Orion's agreement with Kakao Enterprise in April to establish a logistics system using artificial intelligence.

Orion said he will be tasked with discovering new business opportunities and reviewing M&A deals related to the company's food business.

"Based on our performance-based system, we promoted more employees to executives," an Orion official said.

Although Orion has remained cautious about mentioning the chairman's plan to hand over the company's control to his son, the recent executive reshuffle is widely interpreted as another step toward managerial succession.

In 2017, the chairman's son secured a 1.22 percent stake in Orion Holdings through an investment in the group's holding firm. He became the third-largest shareholder of Orion in 2018 by inheriting company shares from his father. As of September, the son holds a 1.23 percent stake in Orion.

The second-largest shareholder of Orion is his mother, Vice Chairwoman Lee Hwa-kyung, the second-oldest daughter of the company's founder, Lee Yang-gu. She holds a 4.08 percent stake in Orion. The vice chairwoman and her husband together hold a 32.6 percent stake in Orion Holdings, as the holding company's largest shareholders.

In order for the son to take control of the group, he needs a larger stake in Orion Holdings. However, he is not expected at this moment to be able to afford a huge amount of tax ― which would be imposed on his inheritance of the holding firm's shares from his parents.

He is therefore expected to swap his stake in Orion with Orion Holdings shares.

"Orion's stock price should go up, and Orion Holdings' should go down, for the son to secure a larger stake in the holding firm," a domestic securities analyst said on condition of anonymity.

Orion Group Chairman Dam Chul-gon appears at the National Police Agency in Seoul to be investigated for the allegation of using the company's money to build his own vacation home, in this 2018 file photo. Korea Times file

However, the younger Dam is still supposed to give Orion Foundation the entire 8.5 billion won ($6.7 million) he had earned from the sale of LangFang Green Eco Packaging, a packing materials supplier he had bought from his father. He made the promise after facing an allegation of evading a gift tax by buying LangFang through a shell company named Stella Way established in Hong Kong in 2013.

Although the prosecution eventually dropped the charge against him, he has continued his donations to the group-owned foundation in the name of social contributions.

In addition, he has to overcome the negative public sentiment toward his father, who was sentenced in 2013 to a three-year jail term suspended for five years for embezzling around 30 billion won of the company's money.