POSCO International's headquarters in Songdo, Incheon / Courtesy of POSCO International

By Kim Jae-heun

POSCO Group is combining its trading arm, POSCO International, with its power generation unit, POSCO Energy. The merger was authorized at a board meeting on Friday. POSCO International plans to finalize the merger deal on Jan. 1, 2023, after obtaining approval at a general shareholders' meeting scheduled for Nov. 4.

When POSCO International and POSCO Energy are combined, it will become a major company with sales of about 40 trillion won ($30.7 billion) and an operating profit of more than 1 trillion won.

The merger ratio between the two companies is 1 to 1.1626920, calculated based on POSCO International's asset value and POSCO Energy's intrinsic value.

POSCO International, a listed company, will issue new shares according to the ratio and hand over 46.78 million shares to POSCO Holdings, a shareholder of POSCO Energy. POSCO International's new shares will be listed on Jan. 20, 2023. After the merger, POSCO Holdings will own a 70.7 percent stake in the trading arm.

POSCO Energy's LNG Terminal in Gwangyang, South Jeolla Province / Courtesy of POSCO International

The combination of the two affiliates was carried out to preemptively respond to changes in the energy market amid the global supply chain crisis and drive quantitative and qualitative growth of the group's energy business.

Through the deal, POSCO International will complete all value chains of natural gas projects ranging from exploration to production, storage and power generation. It also ensures the acceleration of its growth through investments in eco-friendly projects utilizing renewable and hydrogen resources.

"The merger is the first sign of corporate restructuring to secure synergy in the group's business after its transition to a holding company and it will foster POSCO International as a key affiliate of POSCO Group. The trading arm plans to speed up its growth investment, which will have a positive impact on POSCO Holdings' corporate value in the near future," a POSCO Group official said.