POSCO Group's holding company POSCO Holdings will secure about 2.5 trillion won in cash by selling part of its equity in affiliates POSCO International and POSCO DX.
This follows the announcement on the in which it reshaped its business portfolio around industrial resources (steel), strategic resources (lithium, cathode and anode materials, rare earths, etc.), and energy resources (LNG, renewable energy), and unveiled a plan to sell part of the equity of its listed subsidiaries.
POSCO Holdings decided to lower its equity stakes in POSCO International and POSCO DX to 50% each. The cash secured from the equity sales will be used for investments in strategic resources and for share buybacks and cancellations.
POSCO Holdings said in a filing that on the 7th its board approved the disposal of 36,434,963 shares of POSCO International. The disposal date is on the 7th of next month.
The disposal amount is 2,018,496,952,00 won. The previous day's closing price of 55,400 won per share before the board meeting was applied.
Once the share disposal is completed, POSCO Holdings' equity stake in POSCO International will fall from 70.71% to 50.0%. It will retain its status as the largest shareholder.
POSCO Holdings also decided at the board meeting to dispose of part of its equity in POSCO DX. POSCO Holdings will dispose of 23,385,917 shares of POSCO DX on the 7th of next month. The disposal amount is 481,749,892,00 won.
After completion of the disposal, POSCO Holdings' equity stake in POSCO DX will drop from 65.38% to 50.0%. There will be no change in its status as the largest shareholder.
Through the partial sale of equity in the two companies, POSCO Holdings will secure a total of 2,500,246,844,00 won. Regarding the disposal of equity in the two affiliates, POSCO Holdings said it is "to resolve the holding company discount (undervaluation) and to secure resources for strategic investment to enhance corporate value."
POSCO Holdings said that if, on the scheduled disposal dates for both companies, price volatility makes block trade transactions after hours impossible, it may trade over the counter.
POSCO Holdings plans to sign a separate price return swap (PRS) contract in connection with the disposal of POSCO International and POSCO DX shares. A PRS is an over-the-counter derivatives contract in which corporations deposit shares (the underlying asset) with securities firms and share profits and losses arising from price fluctuations of the underlying asset with the securities firm. At settlement, if the value of the underlying shares is higher than at the time of the contract, the corporation receives the difference; if lower, the corporation compensates the securities firm for the loss amount.
POSCO Holdings plans to sign a PRS contract using 36,434,963 shares of POSCO International as the underlying asset. The reference price is 55,400 won per share. The contract term is three years.
It will also sign a PRS contract using 23,385,917 shares of POSCO DX as the underlying asset. The reference price is 20,600 won per share, and the contract term is three years.
At settlement, POSCO Holdings plans to mutually settle the difference between the actual sale amount (net of expense) and the reference price.
On the 2nd of it announced a plan to reduce the equity stakes it holds in listed subsidiaries to around 50% to resolve the holding company discount. Among its listed subsidiaries, POSCO Holdings also holds 58.18% equity in POSCO FUTURE M.