POSCO CEO Choi Jeong-woo

By Lee Kyung-min

Korea's steel giants are increasingly embracing shareholder-friendly dividend policies, in a collective move to appease investor concerns over corporate restructuring plans, whereby the holding firms will claim the entire shares of their spinoffs to the exclusion of current firm shareholders.

Almost all shareholders are concerned that the share prices of the holding firms will plummet, once the spinoffs with far greater growth potential are listed.

The much-dreaded scenario is almost certain to materialize, as illustrated in precedents set by two major Korean holding firms ― LG Chem and SK Chem, both of whose share prices took a dive following spinoff plans concerning LG Energy Solution and SK Bioscience.

Korea's steel giant POSCO said earlier this year that it would retire part of its over 11.6 million shares held by the firm, the first such move in 17 years. Its per-share dividend price, it added, will be raised to 10,000 won, up from 8,000 won that had remained unchanged for years.

SeAH Besteel CEO Kim Chul-hee

According to industry sources, SeAH Besteel Corp is considering increasing the amount of dividends to an all-time high of over 25 percent of net income, greater than the previous range of between 20 percent and 25 percent. Also under consideration is a medium-term payout of annual dividends. The amount among other specifics will be disclosed publicly soon.

The steelmaker is seeking to distance itself from investor speculations, but the slew of shareholder value enhancement measures only strengthens the case for the listing of the spinoff, according to an industry official.

"Shareholders will be furious once their share prices plunge, all the while the spinoff soars upon listing. Increasing dividends is the easiest way to appease their frustration," an industry official said.

The comment is backed by a recent Samsung Securities report which recommended reduced holdings of the steelmaker's shares, an assessment that came on the heels of the firm's shares slumping 13.83 percent on the news of spinoff plans, announced Jan. 20.

In the report released on Jan. 21, Samsung Securities revised the target price to 23,000 won ($19), down from 28,000 won.

"The stock prices plunging immediately after the spinoff plan announcement is explained by investors dumping shares due to what they consider a highly probable listing of the new entity," Samsung Securities researcher Baek Jae-seung said.

Fueling the pessimism further is a lack of clarity in the purpose of the firm's restructuring, the researcher added. "Investors are highly doubtful as to how the new plan would lead to enhancing corporate value. Efforts will be needed to dispel growing concerns."