POSCO Group Chairman Choi Jeong-woo waves the flag of POSCO Holdings during a launching ceremony for the group's holding company at POSCO Center in Seoul, Wednesday. Courtesy of POSCO

Uncertainty remains over holding firm's relocation to Pohang

By Park Jae-hyuk

POSCO Group held a launching ceremony for POSCO Holdings in Seoul as planned on Wednesday, five days after the group promised last Friday to relocate its holding company to its hometown of Pohang, North Gyeongsang Province, by March 2023.

"Today is the day POSCO marks the second founding in its history," POSCO Group Chairman Choi Jeong-woo said in his speech. "From a group-wide perspective, the holding firm should pursue flexibility that meets the demands of the era, and subsidiaries should develop expertise in each of their fields to maintain competitive advantages."

The new holding firm will serve as the parent of the spun-off steelmaking unit, named POSCO, as well as several other subsidiaries, including POSCO Chemical, POSCO International, POSCO E&C, POSCO ICT and POSCO Energy.

Comprised of around 200 employees in charge of management strategies and R&D, it will focus on upgrading the group's competitiveness in seven core sectors ― steelmaking, battery materials, nickel-lithium, hydrogen, energy, construction and agriculture ― to triple its enterprise value by 2030, according to the group.

POSCO Holdings is also supposed to move to Pohang from the country's wealthiest district of Gangnam, Seoul, as the company signed an agreement with the southeastern port city's politicians and residents, who had protested fiercely against the steelmaker's plan to establish its holding company in Seoul.

"We will convince our board members and shareholders to relocate our holding company to Pohang by March 2023," a POSCO Group official said, without disclosing how the company will persuade them or what will happen if it fails to convince them.

Some market observers expect POSCO Holdings to face difficulties especially in convincing foreign shareholders, including Citibank and BlackRock, although most are optimistic about the possibility of the National Pension Service, the largest shareholder with a 9.7 percent stake, approving the plan.

One of POSCO's unions under the Korean Confederation of Trade Unions pointed out last Sunday that the POSCO Group chairman was not among the signatories to the company's agreement with Pohang's politicians and residents. The unionized workers were thus concerned that the company might only change its address, without redeploying its employees in Seoul.

Main opposition People Power Party lawmaker Rep. Kim Byong-wook, who represents Pohang, also said it is too early to make any conclusions about POSCO Group's de facto headquarters returning to the city.

"The agreement only specifies that POSCO will 'pursue' the relocation of its holding company to Pohang by next year," the lawmaker said. "In addition, there is no confirmation about sending the 1,600 employees of POSCO Holdings and POSCO to Pohang from the POSCO Center building in Seoul."

Pohang Mayor Lee Kang-deok dismissed the concerns, saying that the POSCO Group chairman will visit the city after the presidential election on March 9 to discuss follow-up measures.

"The agreement is meaningful as people in other regions began paying attention to POSCO Holdings, after its establishment in Seoul came to the fore on a nationwide scale," the mayor said.

Another task facing POSCO Holdings is to dispel worries about the so-called "holding company discount," which refers to the possibility of a sharp fall in the holding firm's stock price when its key subsidiary goes public.

Kiwoom Securities analyst Lee Jong-hyung said in a report released Wednesday that POSCO Holdings differs from other holding firms, as it will continue to own an entire stake in POSCO, which will remain an unlisted company. In contrast, local proxy adviser Sustinvest warned previously of possible losses that POSCO's shareholders could suffer after the spinoff, considering the stock price drops of other spun-off companies.