A POSCO flag stands at the main gate of the steelmaker's headquarters in Gangnam District, Seoul, in this undated photo. Korea Times file

Jan. 28 shareholder meeting to approve planned split-off of steel business

By Yi Whan-woo

POSCO will retire a part of its 11.6 million treasury shares, in what is seen as a bid to placate shareholders' concerns that the scheduled split-off of its steel operation as part of a drastic restructuring plan will affect the value of their stocks.

The 11.6 million shares account for 13.3 percent of the total floated stocks. When and how many shares will be canceled have not been confirmed yet.

In a similar measure to entice shareholders, the country's largest steelmaker will also increase dividend payments to a minimum 10,000 won ($8.33) per share, after paying out 10, 000 won or less per share for the past several years.

Announced by POSCO Group CEO Choi Jeong-woo in a letter to shareholders, Wednesday, the two aforementioned measures come in the lead-up to POSCO's transition to a holding company.

The transition plan, which was unveiled on Dec. 10, requires a consensus of shareholders during their interim meeting slated for Jan. 28.

The holding company, POSCO Holdings, will wholly own the split-off steel operation while also overseeing development of new growth engines. It will diversify its business portfolio to secondary batteries, nickel, lithium, hydrogen, industrial infrastructure and agricultural food.

Despite POSCO's denial, multiple shareholders cited cases of other conglomerates and questioned the steelmaker's decision to split off its steel unit in order to list it separately on the stock market.

The shareholders protested, claiming that the move will inflict losses on them.

"I ensure you all shareholders that the company remains consistent in its policy that you will continue to benefit directly from the performance of the steel business," CEO Choi said in the letter.

He went on to say that he was aware of the shareholders' concerns as to whether the steel division will be listed separately after being grouped as POSCO Holdings' affiliate.

"And I assure you that it will not be the case," he added, explaining the steel division will stay financially healthy after being split off and therefore does not need any capital funding efforts such as an initial public offering.

Speaking on condition of anonymity, an industry source said the purpose of the firm's split-off is unique compared to other such moves by large private business groups.

The source referred to family-owned conglomerates and their affiliates capitalizing on the split-off as part of restructuring aimed at benefiting the family members who are also controlling shareholders.

POSCO used to be a government-owned entity and has no permanent owner after becoming privatized in 2000.

"You can see POSCO's split-off is virtuous in is nature," the source said.

Concerning the dividend payments, CEO Choi said POSCO will pay out at least 10,000 won per share after 2022 "with consideration of an increase in the valuation of the company."

The company has shared 30 percent of its net profit every quarter as dividends and will continue this practice throughout this year.

The investment banking industry, in general, positively assessed POSCO's measures to woo shareholders.

POSCO shares saw a 3.05 percent price rise and closed at 304,000 won, Thursday.