At the annual shareholders meeting set for next Friday, LG Group’s plans to spin off business units and create a new holding company for them are expected to take center stage.

As the meeting approaches, market experts and advisory institutions are releasing their assessments of the restructuring plan, which the group says it has had in the works since the leadership change in 2018.

LG Corp., the current holding company of LG Group, announced in November that the group would spin off five subsidiaries -- LG International, LG Hausys, Silicon Works, LG MMA and Pantos -- and establish a new holding company, LX Holdings, for them. The plan is subject to final approval from shareholders.

If shareholders approve, LX will be launched May 1 and will be headed by Koo Bon-joon, uncle of the incumbent LG Chairman Koo Kwang-mo, who has succeeded the late Chairman Koo Bon-moo. It is seen by some as the uncle’s departure from under the wing of his nephew.

Taking a positive view of the proposed change is the Corporate Governance Advisory Committee, a research arm of the Korea Listed Companies Association, which said in a recent report that the upcoming spinoff would be a step in the right direction for the group’s “selection and concentration” strategy.

“Amid stagnation in growth and profitability due to COVID-19 pandemic, all members at the committee agree on LG Corp.’s need for business reorganization to enhance long-term shareholder value through selection and concentration,” the committee said in a statement. “We also acknowledge that the (would-be) spun-off units needed business expansion and diversification but they have not been getting strategic attention within the group despite their high growth potential. Thus, the subsidiaries in question would be in a better position to gain the attention they need along with the appropriate resources to grow their businesses through this spin-off.”

Kim Jang-won, an analyst at IBK Securities, said by separating from LG Group, the units could go more aggressive in their own business.

“The new holding firm’s value would be about 9 percent of the current LG Group’s assets, and the two separate holding companies would make efforts to raise their value each,” he said.

“The spin-off is not solely aimed at raising the value, but their aggressive business activities afterwards would lead to increasing the value.”

Meanwhile, the US-based hedge fund Whitebox, which holds a stake of less than 1 percent in LG Corp., reportedly opposes the plan. It sent a letter to the company’s board expressing its objections, the Financial Times reported.

LG has a history of spinning off units -- giving rise to what today are the GS, LIG and LS groups. Spinning off units and creating new holding companies are practices that foreign shareholders view as typical methods of sharing assets among the children of chaebol families in Korea.

But LG says the restructuring plan is based on the group’s “select and concentrate” strategy, and would create a win-win situation for both shareholders and the affiliates.

Since the announcement of the spinoff Nov. 26 last year, the market caps of the three listed firms LG International, LG Hausys and Silicon Works surged 36 percent from 2.3 trillion won ($2 billion) to 3.1 trillion won as of Tuesday.

The share price of LG International, which would be the central unit of LX Holdings, skyrocketed nearly 50 percent. Silicon Works’ price has also soared over 50 percent.

“Under CEO Koo Kwang-mo, LG is strategically focusing on the selected businesses in which the group can excel, and this strategy will continue in the future,” an LG Corp. official explained.

After the spinoff, LG Corp. plans to enhance its shareholder return policy and carry out about 1.8 trillion won worth of investments in artificial intelligence, big data, 5G and health care, it said.

The company is also eyeing mergers and acquisitions to discover new growth engines.

One of the major plans is to list battery maker LG Energy Solution on the securities market within the year. Its initial public offering valuation is estimated at 100 trillion won.

LG Electronics, one of the key affiliates of LG Corp., is also making a significant transition from a consumer electronics business to an automotive electronics provider.

In July, it will make a foray into the growing electric vehicle and future automobile market with the launch of the LG Magna Powertrain, contributing to the group’s overall growth.

By Song Su-hyun (song@heraldcorp.com)