SIMPAC, a listed press and ferroalloy manufacturer, overhauled its governance structure by absorbing its holding company, SIMPAC Holdings, at the end of last year. It moved away from a structure in which the unlisted holding company SIMPAC Holdings controlled the listed SIMPAC, and shifted to a simpler structure in which SIMPAC directly controls its key affiliates. SIMPAC said it plans to use the merger to improve capital-raising conditions and ramp up mergers and acquisitions (M&A).
Some in the business community analyze the move as a strategic choice with an eye toward passing management control to SIMPAC Chairman Choi Jin-sik, 68, and his eldest son, Executive Vice President Choi Min-chan, 41. Choi currently serves as chairman of the Korea Mid-sized Business Federation, a statutory economic group that represents mid-sized companies in Korea.
According to ChosunBiz reporting compiled on the 7th, SIMPAC completed its merger with SIMPAC Holdings on Dec. 12 last year. The merger proceeded with SIMPAC, the operating company, absorbing SIMPAC Holdings, the holding company. SIMPAC Holdings was dissolved, and SIMPAC, as the surviving entity, succeeded to all rights and obligations.
Before the merger, SIMPAC had a typical holding-company structure. With 52.38% equity in SIMPAC, SIMPAC Holdings sat at the apex of governance, and SIMPAC controlled major affiliates such as SIMPAC Industry (industrial machinery and metal casting), the U.S. subsidiary of SIMPAC, WOOJIN Ntec (power plant instrumentation and control facilities), and KDA (automotive parts manufacturing).
◇ Dismantling the holding company and reorganizing around the listed company
Through this merger, SIMPAC significantly simplified its governance. By shifting to a system in which the listed SIMPAC directly controls major affiliates, observers say governance transparency has improved from an investor's perspective. At the same time, it is seen as making capital raising and M&A via the listed company easier going forward.
On a consolidation basis, SIMPAC plans to actively pursue M&A, which it cites as part of its growth DNA, backed by total assets of 1.0796 trillion won and equity capital of 605.2 billion won. SIMPAC was launched when Chairman Choi Jin-sik, a former securities professional, acquired Ssangyong Precision (now SIMPAC) during the breakup of the Ssangyong Group in 2001. Since then, it has grown in scale by absorbing ferroalloy manufacturer Hanhab Industry and acquiring Bongshin (now SIMPAC Industry), among others.
Some also view the merger as groundwork for passing management control to Chairman Choi's eldest son, Executive Vice President Choi Min-chan. Choi, who graduated from Seoul National University's business administration department and earned an MBA from the University of Michigan in the United States, was promoted to executive vice president on the 1st. He currently oversees personnel, finance, and planning as head of SIMPAC's planning and management division.
Before the merger, SIMPAC Holdings was a family company in which the chairman's family held 100% equity. At that time, Executive Vice President Choi Min-chan was the largest shareholder with 39.6% equity, Chairman Choi held 33.6%, and Choi's spouse, Yoon Yeon-su, held 10.3%, respectively. By contrast, the family's direct equity stake in SIMPAC itself did not reach 6%.
After the merger, SIMPAC's equity structure changed significantly. Chairman Choi became the largest shareholder with 22.63% equity in SIMPAC, and Executive Vice President Choi Min-chan rose to the No. 2 shareholder with 21.29%. Choi Min-chan's younger sister, Managing Director Choi Min-young (head of the management headquarters within the planning and management division), holds 9.17%, and Yoon Yeon-su holds 6.16%, respectively.
If Chairman Choi donates or bequeaths equity in the future, observers say the groundwork is in place for Executive Vice President Choi Min-chan to naturally become the largest shareholder without a separate governance restructuring. A corporate governance expert said, "This is a phase of shifting to a listed-company-centered system to execute second-generation succession, instead of indirect control through an unlisted holding company."
◇ Laying the groundwork for second-generation succession… M&A and earnings recovery are tasks
Improving results is a task. Last year, SIMPAC posted 785 billion won in revenue and 24.4 billion won in operating profit. Compared with 2022 two years ago, revenue (672.2 billion won) increased, but operating profit (118.9 billion won) fell 79%. External factors such as raw material prices and electricity rate hikes were significant, but some note that without a recovery in profitability, an aggressive M&A strategy could be burdensome.
A business community source said, "With this merger, SIMPAC secured both simplified governance and a succession foundation," adding, "Whether second-generation Executive Vice President Choi Min-chan can unearth new growth drivers through M&A and deliver a recovery in profitability will be the key to how he is evaluated going forward."