The Hyundai Department Store Group, which has transitioned to a holding company, has gained an additional two years to reorganize its governance structure. The group, which launched its holding company, Hyundai G.F. Holdings, in March 2023, was required to meet holding company requirements by March 1. However, the Fair Trade Commission recently approved Hyundai's request to extend the period for reorganizing its equity.
According to the Fair Trade Commission and Hyundai Department Store Group on the 8th, the Fair Trade Commission has approved a two-year extension for the suspension of the holding company activity restriction requirements as of Nov. 13 last year.
According to a quarterly report submitted to the Financial Supervisory Service last November, Hyundai Future Net was required to dispose of 35.0% equity in Hyundai Bio Land by March 1 this year or hold 100% ownership based on Article 18, Paragraph 4 of the Monopoly Regulation and Fair Trade Act.
However, according to Article 18, Paragraph 6 of the Monopoly Regulation and Fair Trade Act, the Fair Trade Commission granted an additional two-year extension for the suspension of the holding company activity restriction requirements as of Nov. 13 last year. The new suspension period will expire on March 1, 2027.
A Fair Trade Commission official noted, "Initially, there were more than 10 violations at the time of the holding company transition, but most of them have been resolved over the past two years, and now only the case related to Hyundai Bio Land remains." The official explained, "Considering the company’s efforts and external market conditions and economic circumstances, we decided to extend the suspension period."
The Monopoly Regulation and Fair Trade Act grants a two-year grace period for the regulations on violations committed at the time of establishment, transition, or incorporation of a holding company. However, if it is challenging to resolve due to changes in economic conditions, stock disposal restriction contracts, or significant business losses, the extension of the grace period may be approved by the Fair Trade Commission for another two years. The approval for extension is said to be determined through strict review, according to a Fair Trade Commission official.
According to the Monopoly Regulation and Fair Trade Act, once the holding company is launched, it must own 30% equity of listed companies and 50% or more of unlisted companies within two years. Additionally, a subsidiary must be 100% owned by its parent company.
To meet these requirements, Hyundai G.F. Holdings increased its equity stake in Hyundai Home Shopping, which did not meet subsidiary requirements, to 50.01% through a public purchase last April. Furthermore, its subsidiary Hunsam has been working on improving its governance structure, including merging with its cosmetics subsidiary, Hunsam Life &.
Although DAEWON, an auto parts company with a 22.7% equity stake, has not yet met the subsidiary requirements (30% equity for listed companies), Hyundai officials stated that they plan to acquire more equity by February.
Now, the final remaining puzzle is the equity arrangement of Hyundai Bio Land, a subsidiary. Currently, Hyundai Future Net holds 35% equity in Hyundai Bio Land, and it must either acquire an additional 65% equity or elevate Hyundai Bio Land to a grandchild company.
Selling the company to an external party is also an option. However, since Hyundai Bio Land is a core affiliate responsible for the group's future growth engines in beauty and healthcare, the likelihood of sale appears low.
To acquire an additional 65% equity in Hyundai Bio Land, Hyundai Future Net would need approximately 9.22 billion won based on the market capitalization from the previous day. However, as of November last year, Hyundai Future Net's liquid assets were at 4.36 billion won.
If Hyundai Bio Land is elevated to a grandchild company, Hyundai Home Shopping only needs to secure an additional 30% equity, which is half of Hyundai Bio Land's equity. Accordingly, there is increasing speculation in the industry that Hyundai will elevate Hyundai Bio Land from a subsidiary to a grandchild company.
A representative of Hyundai G.F. Holdings stated, "Most of the violations, except for Hyundai Bio Land, have been resolved or are expected to be resolved within the deadline," and added, "We cannot disclose specific equity arrangement plans."