This article was published on the ChosunBiz MoneyMove site on Sept. 8, 2025, at 5:51 p.m.
CJ recently strongly denied rumors of a merger with its profitable subsidiary, CJ Olive Young. Until now, the business and investment banking sectors have regarded the merger of the two companies as a given. CJ Olive Young, a non-listed company, is one of the top performers in the group, and its corporate value is rising steeply, with a high equity stake held by the third generation of ownership.
However, as CJ has now moved to dispel the merger rumors, it seems the merger push will not be easy for the time being. Experts believe that CJ is likely mindful of recent amendments to the Commercial Act, which have significantly strengthened the duty of loyalty of the board of directors to shareholders. If a push for a merger provokes backlash from CJ shareholders, it could become the first target after the amendment to the Commercial Act.
On the 8th, according to the investment banking industry, reports emerged that CJ appointed an accounting firm and began reviewing the merger with CJ Olive Young on the 5th. In response, the group immediately stated, "There has not been any consideration or request for a valuation of a merger at the group level."
Until now, the merger between CJ and CJ Olive Young has been regarded as a natural step. Rumors of a merger between the two companies have circulated consistently since last year. This began when CJ Olive Young embarked on restructuring its equity by purchasing shares held by private equity fund Glenwood Private Equity in the form of treasury stocks. Currently, major shareholders of CJ Olive Young include CJ (51.15%), Lee Sun-ho, the Deputy Minister of Future Planning at CJ (11.04%), former CJ Vice Chairman Lee Jae-hwan (4.64%), and Lee Kyung-hoo, the Deputy Minister in charge of brand strategy at CJ ENM (4.21%). The treasury stock ratio is 22.57%.
The third generation of ownership holds significantly less equity in CJ compared to CJ Olive Young. In the case of CJ, Chairman Lee Jae-hyun, the father, is the largest shareholder with a 42.07% stake, while Deputy Minister Lee Sun-ho holds 3.2%, and Deputy Minister Lee Kyung-hoo holds only 1.47%. In this context, merging the high-value CJ Olive Young, with its significant third-generation equity, with the holding company CJ would naturally expand the third generation's influence over the holding company.
Current valuations of CJ Olive Young in the market vary widely. However, some in the investment banking industry predict that if the company begins a full-scale push for mergers and acquisitions or an IPO, it would aim for a target of 10 trillion won, which is double the market capitalization of the holding company CJ (5 trillion won).
An industry insider familiar with the internal situation of CJ Group said, "It is indeed correct for CJ not to pursue a merger at this time." By completely denying the merger rumors this time, it seems that it will also be difficult for them to begin preparations for a merger in the near future.
That said, they are not considering an IPO as an alternative. An industry insider noted, "Internally, CJ also believes that Olive Young is unlikely to get the level of corporate value it wants recognized in the IPO market."
The industry analyzes that there are reasons why CJ has no choice but to completely deny the push for a merger, regardless of how the situation changes in the future.
The amendments to the Commercial Act passed by the National Assembly last July expand the duty of loyalty of directors to all shareholders. Directors must now fairly protect the interests of not only the company but also of all shareholders.
A legal industry source stated, "In this situation, if CJ Group had acknowledged the merger rumors or at least showed an ambiguous attitude, it could have been the first target after the amendment to the Commercial Act." This means that there could have been controversy suggesting that CJ's directors were increasing the corporate value of CJ Olive Young for the succession of the third generation of ownership while lowering the valuation of the holding company CJ, potentially harming CJ shareholders.