HS HYOSUNG's establishment of a holding company structure has entered the final stage. Led by Vice Chairman Cho Hyun-sang, HS HYOSUNG has affiliates such as HS Hyosung Advanced Materials, HS Hyosung Toyota, and HS Hyosung Information Systems, and became independent from Hyosung Group in Jul. last year.
Under the Monopoly Regulation and Fair Trade Act, a holding company must hold at least 30% of the equity in a listed subsidiary within two years of launch. To meet this threshold, HS HYOSUNG has been buying HS Hyosung Advanced Materials shares every day since Apr., raising its equity stake to the 26% range. Although the grace period runs until Jul. next year, the plan is to meet the equity requirement early to stabilize control and reduce uncertainties related to share purchases.
According to the Financial Supervisory Service's electronic disclosures on the 11th, HS HYOSUNG has steadily bought HS Hyosung Advanced Materials shares on the open market, raising its equity stake to 26.39%. The purchase price per share varies with the market price, at 150,000–210,000 won. HS HYOSUNG plans to lift the stake to 27.63% by Dec. 2.
HS HYOSUNG is hurrying its equity purchases to stabilize management and reduce uncertainty. If it fails to meet the holding company requirements, it could face sanctions such as fines and a penalty surcharge for violating the Fair Trade Act, and if the stock price rises, the acquisition cost will increase.
For HS HYOSUNG to meet the 30% equity requirement for a holding company, it needs to buy more than 160,000 additional shares of HS Hyosung Advanced Materials, and assuming a purchase price of 180,000 won per share, it would need nearly 30 billion won. HS Hyosung Advanced Materials does not have large trading volume, so buying a large amount at once could push up the share price. About half (49.74%) of HS Hyosung Advanced Materials' equity is held by Vice Chairman Cho and HS HYOSUNG.
Short on cash, HS HYOSUNG has been purchasing shares with borrowings. In Aug., it borrowed 8.4 billion won from Woori Bank to buy HS Hyosung Advanced Materials shares. As of the end of Jun., HS HYOSUNG held about 3 billion won in cash and cash equivalents. In the industry, there is talk that Vice Chairman Cho may transfer part of his HS Hyosung Advanced Materials shares to HS HYOSUNG, with Cho receiving new HS HYOSUNG shares.
An HS HYOSUNG official said, "Although there is still considerable time left in the grace period to meet the holding company standards, we are buying shares in advance to enhance shareholder value."