CJ prepares holding company plan

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CJ prepares holding company plan

The Korean food and media conglomerate CJ Group is ramping up its efforts to turn itself into a holding company, following a National Assembly committee’s decision to approve rules making it easier for such conversions.
CJ Corp., Korea’s leading food manufacturer and the group’s flagship company, said yesterday it will present a holding company plan to a board meeting tomorrow.
The National Assembly’s Political Affairs Committee recently passed a revision to the nation’s fair trade law. The revision bill still must be approved by a full session of the Assembly.
The amendment, among other things, calls for the mandatory minimum ownership level that holding companies must have in their subsidiaries to be reduced by 10 percentage points.
That means the stake requirements for listed companies would be cut to 20 percent from the present 30 percent, and to 40 percent from 50 percent for unlisted companies.
CJ has said it will convert to a holding company to improve its governance structure, which it believes will shore up its share prices.
CJ Group’s other main subsidiaries include CJ Homeshopping Co., Korea’s No. 2 cable television shopping channel, and CJ Entertainment Inc.
The government has been encouraging the nation’s top conglomerates to convert to a holding company system. A conglomerate that makes the switch can launch one or several holding companies with subsidiaries. Investments between subsidiaries are banned, and a holding company cannot own shares in another holding company or its subsidiaries in the same conglomerate.
The result is a simpler investment structure and more transparent corporate governance. The government is also offering some tax incentives for converted conglomerates. Thirty-one conglomerates converted to holding companies as of last year.
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