Posco reassures shareholders on restructuring plan

People leave the Posco Center building in Gangnam District, southern Seoul [NEWS1]

Posco continues to reassure investors that shareholder value won't fall following the transition to a holding company, saying that a steel making subsidiary won’t go public and that dividends will rise.

The company sent a letter to shareholders Wednesday reaffirming it will not list its steel making subsidiary after transitioning to a holding company. Its split-off plan needs approval of individual shareholders at a meeting Jan. 28, who own some 70 percent of the company’s outstanding shares.

Requirements for listing will not even be mentioned in the steel-making subsidiary’s articles of incorporation, according to Posco.

“We decided to do so because the holding company and steel-making company will both have healthy financial structures after the split, and thus the steel-making company does not need to go public in order to finance capital,” said Posco CEO Choi Jeong-woo in the letter Wednesday. “Not listing after the split is an ownership structure that prevents all possibilities of shareholders of the holdings company and subsidiary from having conflicting interests.”

Posco announced in December that it will become a holding company, splitting its steel-making business into a wholly owned subsidiary. The surviving company will be named Posco Holdings, acting as a holding company that makes investments, holds shares, conducts research and leads environmental social governance management.

It previously announced the steel-making subsidiary would not go public following the split, but individual shareholders were skeptical. Companies in the past have split off profitable divisions and listed them, such as LG Chem’s LG Energy Solution listing at the end of January and SK Innovation's plans for SK On.

Existing shareholders are to get shares from the surviving holding company, not the steel-making subsidiary. With steel-making responsible for some 70 percent of Posco’s profits, the company’s shares tumbled 4.58 percent on the day of the announcement of the split off in December.

Posco also said it will not list other subsidiaries split from the surviving company.

Part of the treasury shares it holds — a total of 13.26 percent — will be retired within the year, which the company says "will increase shareholder value."

The holding company will maintain a dividend payout ratio of around 30 percent until 2022, similar to recent years. It aims to pay a dividend of over 10,000 won ($8.4) per share to its shareholders. In 2020, it paid 8,000 won.

Following the announcement, Posco shares jumped 3.14 percent to 295,500 won on Wednesday.

BY LEE TAE-HEE [lee.taehee2@joongang.co.kr]