POSCO plans to cancel treasury shares in its holding firm

Top management of South Korea's POSCO Co. has decided to cancel treasury shares in its to-be-launched holding company, in an effort to win shareholder support for the steelmaker's transformation into a holding company structure. 

The size and timing of the share cancellation will be specified at a board meeting, ahead of its extraordinary shareholder gathering due on Jan. 28, according to investment banking sources on Jan. 5.  

POSCO Group last month approved a restructuring plan to split off the steel giant into a steelmaking company and POSCO Holdings.

At the top of the group corporate governance structure, the holding company will own 100% of affiliates such as POSCO Chemical Co., POSCO Energy Co., POSCO Engineering and Construction Co. and POSCO International Co. It will also focus on exploring new businesses and making relevant investments.

The restructuring plan is pending approval from POSCO shareholders. The National Pension Service, the world’s No. 3 pension scheme, is the largest shareholder with a 9.75% stake as of end-September, 2021, followed by Citibank with a 7.3% stake. 

POSCO owns 11.6 million shares in itself, worth 25.9 trillion won ($22 billion) at the current market value. Back in April 2020, the company bought back about 1 trillion won worth of its shares, increasing its treasury stock ownership to a 13.26% stake from 8.11%.

Minority shareholders account for the vast majority of 70% of its outstanding shares.

Treasury stock retirement will likely shore up the company's share price by reducing the number of shares in circulation, resulting in an increase in earnings and dividends per share. 

Last month, POSCO Group Chairman and Chief Executive Choi Jeong-woo dismissed shareholder concerns over equity value dilution from possible parent-subsidiary listings. He stressed that the group would never list on the stock market the steelmaking unit and other businesses to be separated from its holding company.

The world's sixth-largest steel mill has been transforming from a steelmaker based on a large blast furnace production system into a global eco-friendly materials producer.

Last week, it shut down South Korea's first blast furnace after 48 years and six months' operation to replace it with two electric arc furnaces for hot rolled steel.

Write to Market Insight Newsroom at insight@hankyung.com
Yeonhee Kim edited this article.