Hoban Industry, an affiliate of Hoban Group, will convert into a holding company. As the value of subsidiaries such as Taihan Cable & Solution has risen, it decided to convert into a holding company under the Fair Trade Act. There is an outlook that, after the conversion, work such as initial public offerings (IPO) to enhance the value of subsidiaries will take place.
In particular, there is a possibility that Hoban Group's efforts to split affiliates will kick into full gear. At Hoban Group, the three children of Chairman Kim Sang-yeol each exercise control over Hoban Construction, Hoban Industry, and Hoban Property. At Hoban Industry, Executive Director Kim Min-seong, the chairman's second son, is the largest shareholder. With Hoban Industry converting into a holding company first, there is an outlook that, in the long term, the three siblings could move toward independent management through affiliate splits.
According to the electronic disclosure system on the 23rd, Hoban Industry will conduct a simple physical partitioning. The surviving partitioned company, HB Hoban Holdings, will convert into a holding company under the Fair Trade Act. The newly established corporation will be Hoban Industry.
◇ Outlook for subsidiary IPOs after HB Hoban Holdings is established
HB Hoban Holdings will take on the role of a holding company that drives the growth and restructuring of group businesses, enhances synergies among businesses, and discovers and fosters new business planning. The newly established Hoban Industry will focus on strengthening the competitiveness of its existing businesses, including dwellings construction and sales and supply, and building, civil engineering, and tunnel construction.
Existing subsidiaries under Hoban Industry, such as Taihan Cable & Solution, Hoban TBM, and Hoban Summit, will also be brought under HB Hoban Holdings. The partitioning date is the 31st of next month.
Hoban Industry decided on this holding-company conversion in line with the rise in the equity value of Taihan Cable & Solution. Under the Monopoly Regulation and Fair Trade Act (Fair Trade Act), a company meets the requirements for a holding company if its total assets are at least 500 billion won and the total value of the shares it holds in subsidiaries is at least 50% of its total assets. In the case of Hoban Industry, as the share value of Taihan Cable & Solution rose, the proportion of subsidiary share value within Hoban Industry's total assets reached 43.9%. As of the end of last year, Hoban Industry's total assets (separate basis) were 2.2816 trillion won.
A Hoban Group official said, "Under the Fair Trade Act, if a parent company's equity in its subsidiaries accounts for 50% of its total assets, it must convert into a holding company, and the ratio was very close, so we proceeded with the holding-company conversion." The official added, "The judgment that a pure holding company is needed as we expand businesses such as Taihan Cable & Solution also influenced this decision."
There is an expectation that, after HB Hoban Holdings launches, work to boost corporate value, including IPOs of subsidiaries, will take place. With the launch of the holding company making it relatively freer from regulations on subsidiary share value, the outlook is that it will move in earnest to foster subsidiaries. Among Hoban Industry's subsidiaries, Taihan Cable & Solution is currently the only listed company.
An industry official said, "After the holding company launches, the role of Taihan Cable & Solution will grow even larger," adding, "Hoban Industry and Hoban TBM, which will be classified as subsidiaries under the new governance structure, also appear likely to expand their businesses through IPOs."
◇ Hoban Group's second-generation management in full swing… a starting signal for affiliate splits
There is an interpretation that Hoban Industry's conversion into a holding company could be the starting signal for affiliate splits. At Hoban Group, while the outline of the succession structure has taken shape, the equity cleanup has been difficult, and the owner family's second generation has not split affiliates.
Hoban Group broadly has three companies—Hoban Construction, Hoban Industry, and Hoban Property—as business-type holding companies. President Kim Dae-heon, the eldest son of Chairman Kim, oversees Hoban Construction, and Executive Director Kim, the second son, oversees Hoban Industry. President Kim Yun-hye, the eldest daughter, manages Hoban Property.
If, like Hoban Industry, Hoban Construction and Hoban Property also pursue the establishment of holding companies upon meeting the requirements, the possibility of affiliate splits being realized in the long term cannot be ruled out. In particular, in the case of Hoban Construction, the proportion of subsidiary share value in total assets stands at 36.73%, getting closer to the holding-company conversion requirement of 50%.
However, some say it will be difficult for the three siblings of Hoban Group to easily split affiliates. With Hoban Construction (11.36%) and Hoban Property (4.66%) also holding equity in Hoban Industry, the outlook is that it will be hard to quickly straighten out the complex equity structure. There is also analysis that, with the governance structure already complete, there is little need to carry out additional equity purchases among siblings to straighten out their holdings.
An industry official said, "Because the structure is complicated, with equity among group companies intertwined, an affiliate split does not appear easy," adding, "For now, second-generation managers will first proceed with work to raise the value of the subsidiaries under each of them."