On the 24th, shortly after the market closed, Binggrae released a public announcement. It stated that all plans for partitioning and conversion to a holding company, which were scheduled for May, were canceled. There were also no plans for disposing of treasury stock. Binggrae noted, "We have determined that a clearer plan for enhancing shareholder value is needed before proceeding with partitioning, and therefore we are withdrawing the partitioning plan."
Industry insiders interpret that the process of transitioning to a holding company or partitioning itself might have been burdensome as it is perceived as a process for corporate succession. Although there was a proposed plan to burn the treasury stock, the perception that the decision to partition undermines the rights of minority shareholders has become widespread. In 2023, Hyundai Department Store also attempted partitioning for transitioning to a holding company but introduced several measures to prevent the infringement of shareholder rights after the National Pension Service expressed its opposition, ultimately leading to cancellation.
In the securities industry, two reasons are cited for Binggrae's withdrawal from the plan to transition to a holding company. First, once the partitioning and the transition to a holding company are completed, the position of overseas subsidiaries in the newly established governance structure would be equal to that of the partitioned company, which is referred to as Binggrae.
The reason this is problematic is that the valuation of food and beverage companies is significantly influenced by their expansion into overseas markets. This implies that the corporate value of the newly established company, Binggrae, will need reassessment. It suggests that it may not align with current investors' calculations.
Han Yoo-jung, an analyst at Hanwha Investment & Securities, explained, "While exporting to the U.S., China, and Vietnam, only the manufacturing margin will be taken by the newly established company, Binggrae, while the distribution margin will go to Binggrae Holdings, not Binggrae itself. This could change the timing of revenue recognition and the average selling price completely." It is likely that Binggrae's share of overseas sales will decrease post-partitioning. One analyst stated, "Binggrae's share of overseas sales is expected to drop from 22% before the partitioning to 11.5%, with revenue growth projections falling from 5.6% before to 4% after the partitioning."
There is also pressure regarding Binggrae's affiliate, "Jette." The Fair Trade Commission is currently investigating allegations of unfair internal transactions between Binggrae and Jette. Jette is a refrigerated and frozen logistics subsidiary that Binggrae acquired in 2006. Jette holds 1.99% of Binggrae's equity, which is divided among the three children of Chairman Kim Ho-yeon. Jette has continually grown through internal transactions with Binggrae. The total internal transaction amount between Binggrae and Jette reached 100.9 billion won in the third quarter of 2024, marking a 30.7% increase from 77.2 billion won during the same period last year.
In the capital markets, there are views that Jette will inevitably be used at some point for succession work, as this is necessary for smooth succession. Thus far, Jette has essentially served as a source of dividends for the three children of Chairman Kim Ho-yeon. Jette has consistently paid dividends for nearly a decade since 2013. Regarding this, a representative from Binggrae stated, "There is nothing further to explain about the cancellation of the transition to a holding company other than what has been disclosed."