November 22, 2024

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[THE INVESTOR] LG Group Vice Chairman Koo Bon-joon is preparing to leave the nation’s fourth-largest conglomerate as his nephew has recently been named the group’s new fourth-generation leader under its “first son-only” succession rule.

Last month, LG named Koo Kwang-mo, the only son of late Chairman Koo Bon-moo, as the chairman of LG Corp., the group’s holding unit, saying the uncle would resign from all his posts by the end of this year.

 

Koo Bon-joon

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Now keen attention is being paid not just to the young chairman’s leadership but also to the departing vice chairman’s next move that is likely to lead to a modest business restructuring among LG companies.

Koo’s departure follows the long-held tradition of the owner family. Since founder Koo In-hoe set up the group back in 1947, only the first son has been decided as the group’s leader to prevent any sibling feud over ownership that is prevalent at other family-run conglomerates here.

When the late third-generation Chairman Koo took office in 1995, his siblings and uncles left the group along with spin-off firms, mostly non-core businesses like fashion and food. His younger brother Bon-joon was the only one who has stayed at the group for 33 years.

With LG starting related discussions together with several advisory firms, industry sources say the vice chairman is likely to use his 7.72 percent stake in LG Corp. He could secure almost 1 trillion won (US$900 million) in cash by selling off the stake to purchase a major stake in another LG company.

Considering he has been leading automotive parts business most recently, LG Innotek, a parts-making unit, is cited as one of the possible firms he could consider. He can purchase about 25 percent stake in the firm whose market cap is 3.7 trillion won. Currently, LG Electronics is the largest shareholder with 40.79 percent.

Expectations are also high on business synergies with Jiheung, a separate parts-making firm that is wholly owned by his son Koo Hyung-mo. By combing all parts units across affiliates, the vice chairman could seek to set up one of the nation’s largest parts making firms.

“The issue is LG Innotek is one of the key units behind LG’s recent automotive push. Considering synergies with other units like LG Electronics and LG Display, the group wouldn’t want to spin off the lucrative business,” an industry source said on condition of anonymity.

Another possible purchase is LG International, a trading business unit whose market cap is worth 870 billion won. It is cheaper than others but the business is less attractive for Koo who has worked in key businesses like semiconductor, display and automotive parts.

“The possible stake swap should be approved by shareholders. LG and the vice chairman will be required to offer clear reasons in order not to face criticism,” the source added.

By Lee Ji-yoon (jylee@heraldcorp.com)