CS Wind, a global manufacturer of wind tower and offshore wind substructures, will increase its equity stake in its subsidiary, CS Bearing, to over 50%. This is interpreted as a move to strengthen management rights while avoiding double taxation on dividends.
According to the Financial Supervisory Service, CS Wind submitted a transaction plan report on the 7th. The plan involves purchasing CS Bearing shares worth 12 billion won from March 5 to March 6. CS Wind stated that the purpose of acquiring CS Bearing shares is "to strengthen management rights through equity expansion."
CS Wind will purchase 2,348,337 shares of CS Bearing based on its closing price of 5,110 won on the 3rd. After the transaction is completed, CS Wind's equity stake in CS Bearing will increase from the existing 46.89% to 55.5%.
It appears that CS Wind believes that CS Bearing's stock price is at a low level. The stock price of CS Bearing plummeted from an opening price of 11,000 won on Jan. 2 last year to a closing price of 4,375 won on Dec. 30. Following the confirmation of the Donald Trump administration's critical stance on renewable energy and the outbreak of the Dec. 3 martial law incident, the stock fell to 3,600 won during trading last month, marking a low not seen in over four years.
CS Bearing's stock price was 5,740 won at 10:50 a.m. on the day, soaring more than 30% since the beginning of the year. As CS Wind embarks on a "buying spree," it seems likely that it will contribute to the upward momentum of CS Bearing's stock price. The trading days during the period that CS Wind announced for stock purchases total 20 days. Dividing the planned quantity by the trading days yields an average of 114,700 shares per day. This figure is about 70% of the average daily trading volume of 164,600 shares for CS Bearing over the past month, indicating that the trading volume could increase accordingly.
If CS Wind secures over 50% of CS Bearing's equity, it could receive a tax benefit with a 100% exclusion rate for taxable income. This means that the dividends CS Wind receives from CS Bearing will be excluded from its taxable income, thus reducing its corporate tax burden.
However, the total acquisition size of CS Wind's shares in CS Bearing may vary between 70% (8.4 billion won) and 130% (15.6 billion won), and if CS Bearing's stock price rises sharply, the equity stake it secures may be less than expected.
CS Wind holds a 100% stake in its subsidiaries, excluding CS Bearing. This is cited as a driving force for CS Wind's ability to consistently pay dividends for over 10 years. CS Wind decided on a dividend of 1,000 won per share for last year's settlement of accounts, which is double that of the 2023 settlement dividend.
CS Wind is the global market leader in the wind tower sector, while CS Bearing produces bearings for wind power generation as its main product. Both companies are likely to be significantly affected by the energy policy of the Trump administration in the United States, which is their core market.
Domestically, securities firms and global investment banks view CS Wind's growth prospects optimistically. According to the investment platform MarketScreener, 12 institutions project CS Wind's revenue for this year to be 33.55 trillion won and its earnings before interest, taxes, depreciation, and amortization (EBITDA) to be 4.204 trillion won. These figures are 7.1% and 8.7% higher than last year's annual performance estimates, respectively.