On the 10th, Emart announced a transaction plan to buy all of the 10% equity held by Chairman Lee Myung-hee, the mother of Chung Yong-jin, Chairman of Shinsegae Group.
Chairman Chung Yong-jin plans to purchase 2,787,582 common shares (10.0%) of Emart, held by his mother, Chairman Lee, at 76,800 won per share, totaling 214.086 billion won, through off-hours trading for 30 transaction days from today until March 11.
Once the acquisition of the equity is completed, Chairman Chung Yong-jin's equity ratio in Emart will increase from the existing 18.56% to 28.56%.
Chairman Chung Yong-jin is expected to mobilize personal funds to secure the equity. A Shinsegae Group official noted, “This stock purchase plan is a measure to strengthen performance-based management responsibility as the largest shareholder of Emart.”
The official added, “In an uncertain internal and external environment, Chairman Chung’s decision to invest personal assets and take on the burden of purchasing Emart's equity demonstrates a sense of responsibility and confidence regarding the enhancement of Emart's corporate value.”
Industry analysts suggest that Chairman Chung Yong-jin's equity purchase is a follow-up measure for the separation of Emart from Shinsegae Co., Ltd. Legally, a reorganization of equity among relatives must occur first to achieve such a separation. According to the Fair Trade Act, for the separation among relatives to take place, cross-holding equity must be less than 3% for listed companies and less than 10% for unlisted corporations.
Looking at the governance structure of Emart and Shinsegae, Chairman Chung Yong-jin and Chairman Chung Yu-kyung are the largest shareholders, holding 18.56% equity in Emart and 18.56% equity in Shinsegae, respectively. Chairman Lee holds 10.0% equity in both Emart and Shinsegae.
Previously, in 2011, Chairman Lee Myung-hee partitioned Emart and the department store into two separate companies and assigned her eldest son, Chairman Chung Yong-jin, to Emart and her daughter, Chairman Chung Yu-kyung, to the department store business. In 2019, they established new institutional sectors for the department store and Emart to enable Shinsegae Co., Ltd. and Emart to function effectively as holding companies.
In March of last year, the group officially formalized its separation by promoting Chairman Chung Yong-jin from vice chairman to chairman and promoting Chairman Chung Yu-kyung from president to chairman of Shinsegae Co., Ltd. at the same time in October. At that time, Shinsegae Group stated, “We will promote new growth by separating the group into two axes: the department store sector and the Emart sector” and added, “We plan to gather our capabilities to ensure a smooth separation in the future.”
However, the Fair Trade Commission has designated Chairman Lee Myung-hee as the “same person” despite Chairman Chung Yong-jin's promotion to group chairman, determining that she effectively controls the group.
As a result, with Chairman Chung Yong-jin now purchasing all of Chairman Lee's equity, it has become more likely that he will be designated as the same person. Analysts interpret that the choice to purchase equity, which incurs roughly twice the expense compared to gifting it, reflects his determination to strengthen responsible management as the head of the group.
Currently, Emart operates a number of subsidiaries focused on its large mart business, including Gmarket, SCK Company (Starbucks), Emart24 (convenience stores), Shinsegae Property (Starfield), Shinsegae Food (food), and Chosun Hotel & Resort (hotels). Shinsegae Co., Ltd. focuses on the department store business while also managing several subsidiaries, including Shinsegae Duty Free (duty-free shops), Shinsegae International (fashion and beauty), Shinsegae Central City, Shinsegae Casa (living), and Shinsegae Live Shopping (home shopping).
Jointly owned by Emart and Shinsegae, SSG.com (Ssg.com) has Emart holding 45.6% and Shinsegae holding 24.4% of the equity.
Meanwhile, unlike Chairman Chung Yong-jin, who decided to purchase all of Chairman Lee Myung-hee’s equity on that day, Chairman Chung Yu-kyung has not yet announced any purchase plans. A Shinsegae official said, “We have not received any information about Chairman Chung Yu-kyung’s equity purchase.”