Korea / Special Situations, Clepsydra Capital

Sanghyun Park

I investigate special situations in Korea.

Korea / Special Situations

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LG Group's third generation de facto leader Koo Bon-moo passed away today. This means LG Group is now officially in the hands of the fourth generation leader named Koo Gwang-mo. <div class="content-caption">(Koo Bon-moo - Courtesy YTN News)</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/052/802/original/1.jpg?1526826339" class="editor-image img-responsive" data-smartkarma-image-id="52802"></figure>Koo Gwang-mo, Koo Bon-moo's adopted son and currently serving as a director at LG Electronics Information Display business unit, will soon be appointed as a representative director (CEO) of LG Group's holding company <a href="https://www.smartkarma.com/entities/6653" target="_blank" data-smartkarma-citation="entities:6653:1">LG Corp (003550 KS)</a>.<div class="content-caption">(Koo Gwang-mo - Courtesy Business Watch)</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/052/805/original/2.jpg?1526827910" class="editor-image img-responsive" data-smartkarma-image-id="52805"></figure><table class="table table-striped"><tbody><tr><td colspan="2" style="width: 770px;">Koo Gwang-mo profile</td></tr><tr><td style="width: 268.13751220703125px;">Name</td><td style="width: 501.86248779296875px;">Koo Gwang-mo (구광모, 具光謨)</td></tr><tr><td style="width: 268.13751220703125px;">Age</td><td style="width: 501.86248779296875px;">40 (Jan 23, 1978)</td></tr><tr><td style="width: 268.13751220703125px;">Biological father </td><td style="width: 501.86248779296875px;">Koo Bon-neung</td></tr><tr><td style="width: 268.13751220703125px;">Adoptive father</td><td style="width: 501.86248779296875px;">Koo Bon-moo (adopted in 2004)</td></tr><tr><td style="width: 268.13751220703125px;">Alma mater</td><td style="width: 501.86248779296875px;">Rochester Institute of Technology (studied engineering at undergraduate)Stanford University (MBA)</td></tr><tr><td style="width: 268.13751220703125px;">Professional career</td><td style="width: 501.86248779296875px;">Finance unit at LG ElectronicsHome entertainment unit at LG ElectornicsLG Synergy unit at LG CorpInformation Display unit at LG Electronics</td></tr><tr><td colspan="2" style="width: 770px;">Source: Namuwiki, Forbes</td></tr></tbody></table>The Koo family itself alone is a very large family. Moreover, they had long partnered with the Huh family for more than 6 decades. As a result, there have been numerous business separations over the last thirty years. However, the LG Group, the core part, has consistently been succeeded based on the family's eldest son succession rule.<div class="content-highlight">As mentioned in the above table, Koo Gwang-mo's biological father isn't Koo Bon-moo. His real father is Koo Bon-neung, the younger brother of Koo Bon-moo. That is, he is Koo Bon-moo's nephew. Koo Bon-moo actually had one son. But he died at a young age in a car accident. So, Koo Gwang-mo, the second oldest son among the third generations in the Koo family, had naturally emerged as a fourth generation successor. To stick to the family's eldest son succession rule, he became an adopted son of Koo Bon-moo in 2004 in preparation for the succession.</div>LG Group was one of the first wave Korean chaebols which opted to adopt a holdco structure. <a href="https://www.smartkarma.com/entities/6653" target="_blank" data-smartkarma-citation="entities:6653:1">LG Corp (003550 KS)</a> is the group's holding company. Below shows LG Group's holding structure which is taken from the LG Corp's corporate website. This means one thing. The succession process at the LG Group is all about transferring the ownership of LG Corp from Koo Bon-moo to Koo Gwang-mo. That is, LG Group's succession process wouldn't be as complex as Samsung or HMG.<table class="table table-striped"><tbody><tr><td colspan="6" style="width: 764px;">LG Group family succession/separation history</td></tr><tr><td style="width: 85px;"></td><td style="text-align: center; width: 164px;">The Koo family(LG Group)</td><td style="text-align: center; width: 139px;">The Huh family(GS Group)</td><td style="width: 172.07501220703125px;">Note</td><td rowspan="8" style="width: 21.92498779296875px;"></td><td style="width: 182px;">Another family business separation</td></tr><tr><td style="width: 85px;">1st generation (founder)</td><td style="text-align: center; width: 164px;">Koo In-hoi</td><td style="text-align: center; width: 139px;">Huh Man-jung</td><td style="width: 172.07501220703125px;">Koo In-hoi founded the company in 1931 and partnered with the Huh family in 1941.</td><td rowspan="7" style="width: 182px;">Koo Ja-hak, the younger brother of Koo Ja-kyung, founded Our Home Co. Ltd. by separating the F&amp;B business from LG Group in 1995.Koo Bon-neung and Koo Bon-sik, the younger brothers of Koo Bon-moo, founded Heesung Group by separating the electronic component/part business from LG Group in 1996.The descendants of Koo Chul-hoi, the younger brother of Koo In-hoi, founded LIG Group by separating the financial business from LG Group in 1999.The descendants of Koo Tae-hoi, Koo Pyeong-hoi and Koo Doo-hoi (the younger brothers of Koo In-hoi) founded LS Group by separating the raw materials/industrial parts business from LG Group in 2003.</td></tr><tr><td style="width: 85px;"></td><td style="text-align: center; width: 164px;">↓</td><td style="text-align: center; width: 139px;">↓</td><td style="width: 172.07501220703125px;"></td></tr><tr><td style="width: 85px;">2nd generation</td><td style="text-align: center; width: 164px;">Koo Ja-gyung</td><td style="text-align: center; width: 139px;">Huh Joon-gu</td><td style="width: 172.07501220703125px;">Koo Ja-gyung, the eldest son of Koo In-hoi, was appointed as LG Group's chairman in 1970.Huh Joon-gu was the third son of Huh Man-jung</td></tr><tr><td style="width: 85px;"></td><td style="text-align: center; width: 164px;">↓</td><td style="text-align: center; width: 139px;">↓</td><td style="width: 172.07501220703125px;"></td></tr><tr><td style="width: 85px;">3rd generation</td><td style="text-align: center; width: 164px;">Koo Bon-moo</td><td style="text-align: center; width: 139px;">Huh Chang-soo</td><td style="width: 172.07501220703125px;">Koo Bon-moo, the eldest son of Koo Ja-kyung, was appointed as LG Group's chairman in 1995.Huh Chang-soo founded GS Group by separating the petrochemical/retail distribution businesses from LG Group in 2004.</td></tr><tr><td style="width: 85px;"></td><td style="text-align: center; width: 164px;">↓</td><td style="text-align: center; width: 139px;">↓</td><td style="width: 172.07501220703125px;"></td></tr><tr><td style="width: 85px;">4th generation</td><td style="text-align: center; width: 164px;">Koo Gwang-mo</td><td style="text-align: center; width: 139px;">-</td><td style="width: 172.07501220703125px;">Koo Gwang-mo, the adopted son of Koo Bon-moo (his biological father is Koo Bon-neung, Koo Bon-moo's younger brother), will soon be appointed as LG Group's chairman.</td></tr><tr><td colspan="6" style="width: 764px;">Source: Multiple news reports (re-edited by <a href="https://www.smartkarma.com/profiles/354" target="_blank" data-smartkarma-citation="accounts:354">Sanghyun Park</a>)</td></tr></tbody></table><div class="content-caption">(LG Group holding structure - Courtesy LG Corp.)</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/052/810/original/4.png?1526838844" class="editor-image img-responsive" data-smartkarma-image-id="52810"></figure>Koo Gwang-mo has already secured a 6.12% stake in LG Corp through multiple equity transfer/swap processes since 2004. It is almost certain that he will inherit Koo Bon-moo's 11.06% stake along with his biological father's 3.39% stake. So, his total shareholding in the LG Group's holding company will eventually increase to at least 20.57%. Combined with the stake owned by the other family members, his controlling stake will still be about 45% which of course can be said 'quite stable'.<table class="table table-striped"><tbody><tr><td>LG Corp major shareholder detail (as of May 18, 2018)</td><td style="text-align: right;">Relation</td><td style="text-align: right;">Common shares owned</td><td style="text-align: right;">Total shares owned</td><td style="text-align: right;">Shareholding %</td><td style="text-align: right;">Common shareholding %</td></tr><tr><td>Koo Bon-moo</td><td style="text-align: right;">Major shareholder</td><td style="text-align: right;">19,458,169</td><td style="text-align: right;">19,458,169</td><td style="text-align: right;">11.06</td><td style="text-align: right;">11.28</td></tr><tr><td>Koo Bon-joon</td><td style="text-align: right;">Koo Bon-moo's brother</td><td style="text-align: right;">13,317,448</td><td style="text-align: right;">13,317,448</td><td style="text-align: right;">7.57</td><td style="text-align: right;">7.72</td></tr><tr><td>Koo Gwang-mo</td><td style="text-align: right;">4th gen successor</td><td style="text-align: right;">10,759,715</td><td style="text-align: right;">10,759,715</td><td style="text-align: right;">6.12</td><td style="text-align: right;">6.24</td></tr><tr><td>Koo Bon-sik</td><td style="text-align: right;">Koo Bon-moo's brother</td><td style="text-align: right;">7,728,601</td><td style="text-align: right;">7,728,601</td><td style="text-align: right;">4.39</td><td style="text-align: right;">4.48</td></tr><tr><td>Kim Young-sik</td><td style="text-align: right;">Koo Bon-moo's wife</td><td style="text-align: right;">7,253,100</td><td style="text-align: right;">7,253,100</td><td style="text-align: right;">4.12</td><td style="text-align: right;">4.20</td></tr><tr><td>Koo Bon-neung</td><td style="text-align: right;">Koo Bon-moo's brother &amp; Koo Gwang-mo's biological father</td><td style="text-align: right;">5,955,032</td><td style="text-align: right;">5,955,032</td><td style="text-align: right;">3.39</td><td style="text-align: right;">3.45</td></tr><tr><td>Choi Byung-min</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">591,594</td><td style="text-align: right;">591,594</td><td style="text-align: right;">0.34</td><td style="text-align: right;">0.34</td></tr><tr><td>Koo Mi-jung</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">1,359,600</td><td style="text-align: right;">1,359,600</td><td style="text-align: right;">0.77</td><td style="text-align: right;">0.79</td></tr><tr><td>Koo Bon-gil</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">312,020</td><td style="text-align: right;">312,020</td><td style="text-align: right;">0.18</td><td style="text-align: right;">0.18</td></tr><tr><td>Koo Bon-young</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">53,500</td><td style="text-align: right;">53,500</td><td style="text-align: right;">0.03</td><td style="text-align: right;">0.03</td></tr><tr><td>Koo Yeon-gyung</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">1,566,279</td><td style="text-align: right;">1,566,279</td><td style="text-align: right;">0.89</td><td style="text-align: right;">0.91</td></tr><tr><td>Koo Yeon-su</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">265,064</td><td style="text-align: right;">265,064</td><td style="text-align: right;">0.15</td><td style="text-align: right;">0.15</td></tr><tr><td>Koo Yeon-jae</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">450,386</td><td style="text-align: right;">450,386</td><td style="text-align: right;">0.26</td><td style="text-align: right;">0.26</td></tr><tr><td>Koo Ja-gyung</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">1,648,887</td><td style="text-align: right;">1,648,887</td><td style="text-align: right;">0.94</td><td style="text-align: right;">0.96</td></tr><tr><td>Koo Ja-young</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">611,531</td><td style="text-align: right;">611,531</td><td style="text-align: right;">0.35</td><td style="text-align: right;">0.35</td></tr><tr><td>Koo Hyun-mo</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">129,654</td><td style="text-align: right;">129,654</td><td style="text-align: right;">0.07</td><td style="text-align: right;">0.08</td></tr><tr><td>Koo Hyung-mo</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">1,041,857</td><td style="text-align: right;">1,041,857</td><td style="text-align: right;">0.59</td><td style="text-align: right;">0.60</td></tr><tr><td>Koo Hwon-mi</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">477,533</td><td style="text-align: right;">477,533</td><td style="text-align: right;">0.27</td><td style="text-align: right;">0.28</td></tr><tr><td>Kim Seo-young</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">15,860</td><td style="text-align: right;">15,860</td><td style="text-align: right;">0.01</td><td style="text-align: right;">0.01</td></tr><tr><td>Kim Seo-eun</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">190,460</td><td style="text-align: right;">190,460</td><td style="text-align: right;">0.11</td><td style="text-align: right;">0.11</td></tr><tr><td>Kim Seon-jung</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">175,587</td><td style="text-align: right;">175,587</td><td style="text-align: right;">0.10</td><td style="text-align: right;">0.10</td></tr><tr><td>Kim Seon-hye</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">1,299,851</td><td style="text-align: right;">1,299,851</td><td style="text-align: right;">0.74</td><td style="text-align: right;">0.75</td></tr><tr><td>Kim Eun-mi</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">94,299</td><td style="text-align: right;">94,299</td><td style="text-align: right;">0.05</td><td style="text-align: right;">0.05</td></tr><tr><td>Kim Joo-young</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">2,300</td><td style="text-align: right;">2,300</td><td style="text-align: right;">0.00</td><td style="text-align: right;">0.00</td></tr><tr><td>Yoo Woong-seon</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">84,955</td><td style="text-align: right;">84,955</td><td style="text-align: right;">0.05</td><td style="text-align: right;">0.05</td></tr><tr><td>Yoo Jun-seon</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">57,224</td><td style="text-align: right;">57,224</td><td style="text-align: right;">0.03</td><td style="text-align: right;">0.03</td></tr><tr><td>Yoo Hee-young</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">117,093</td><td style="text-align: right;">117,093</td><td style="text-align: right;">0.07</td><td style="text-align: right;">0.07</td></tr><tr><td>Lee Wook-jin</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">1,091,765</td><td style="text-align: right;">1,091,765</td><td style="text-align: right;">0.62</td><td style="text-align: right;">0.63</td></tr><tr><td>Lee Jae-won</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">185,875</td><td style="text-align: right;">185,875</td><td style="text-align: right;">0.11</td><td style="text-align: right;">0.11</td></tr><tr><td>Choi Hyun-soo</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">3,932</td><td style="text-align: right;">3,932</td><td style="text-align: right;">0.00</td><td style="text-align: right;">0.00</td></tr><tr><td>LG Yeonam Academy</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">3,675,742</td><td style="text-align: right;">3,675,742</td><td style="text-align: right;">2.09</td><td style="text-align: right;">2.13</td></tr><tr><td>LG Yeonam Cultural Foundation</td><td style="text-align: right;">Special affiliate person</td><td style="text-align: right;">572,525</td><td style="text-align: right;">572,525</td><td style="text-align: right;">0.33</td><td style="text-align: right;">0.33</td></tr><tr><td>Total owned by the major shareholder and his special affiliate persons</td><td style="text-align: right;">-</td><td style="text-align: right;">80,547,438</td><td style="text-align: right;">80,547,438</td><td style="text-align: right;">45.80</td><td style="text-align: right;">46.68</td></tr><tr><td colspan="6">Source: KRX FIND</td></tr></tbody></table>

LG Group's third generation de facto leader Koo Bon-moo passed away today. This means LG Group is now officially in the hands of the fourth generation leader named Koo Gwang-mo. (Koo Bon-moo - Courtesy YTN News)Koo Gwang-mo, Koo Bon-moo's adopted son and currently serving as a director at LG Electronics Information Display business unit, will soon be appointed as a representative director (CEO) of LG Group's holding company LG Corp (003550 KS).(Koo Gwang-mo - Courtesy Business Watch)Koo Gwang-mo profileNameKoo Gwang-mo (구광모, 具光謨)Age40 (Jan 23, 1978)Biological father Koo Bon-neungAdoptive fatherKoo Bon-moo (adopted in 2004)Alma materRochester Institute of Technology (studied engineering at undergraduate)Stanford University (MBA)Professional careerFinance unit at LG ElectronicsHome entertainment unit at LG ElectornicsLG Synergy unit at LG CorpInformation Display unit at LG ElectronicsSource: Namuwiki, ForbesThe Koo family itself alone is a very large family. Moreover, they had long partnered with the Huh family for more than 6 decades. As a result, there have been numerous business separations over the last thirty years. However, the LG Group, the core part, has consistently been succeeded based on the family's eldest son succession rule.As mentioned in the above table, Koo Gwang-mo's biological father isn't Koo Bon-moo. His real father is Koo Bon-neung, the younger brother of Koo Bon-moo. That is, he is Koo Bon-moo's nephew. Koo Bon-moo actually had one son. But he died at a young age in a car accident. So, Koo Gwang-mo, the second oldest son among the third generations in the Koo family, had naturally emerged as a fourth generation successor. To stick to the family's eldest son succession rule, he became an adopted son of Koo Bon-moo in 2004 in preparation for the succession.LG Group was one of the first wave Korean chaebols which opted to adopt a holdco structure. LG Corp (003550 KS) is the group's holding company. Below shows LG Group's holding structure which is taken from the LG Corp's corporate website. This means one thing. The succession process at the LG Group is all about transferring the ownership of LG Corp from Koo Bon-moo to Koo Gwang-mo. That is, LG Group's succession process wouldn't be as complex as Samsung or HMG.LG Group family succession/separation historyThe Koo family(LG Group)The Huh family(GS Group)NoteAnother family business separation1st generation (founder)Koo In-hoiHuh Man-jungKoo In-hoi founded the company in 1931 and partnered with the Huh family in 1941.Koo Ja-hak, the younger brother of Koo Ja-kyung, founded Our Home Co. Ltd. by separating the F&amp;B business from LG Group in 1995.Koo Bon-neung and Koo Bon-sik, the younger brothers of Koo Bon-moo, founded Heesung Group by separating the electronic component/part business from LG Group in 1996.The descendants of Koo Chul-hoi, the younger brother of Koo In-hoi, founded LIG Group by separating the financial business from LG Group in 1999.The descendants of Koo Tae-hoi, Koo Pyeong-hoi and Koo Doo-hoi (the younger brothers of Koo In-hoi) founded LS Group by separating the raw materials/industrial parts business from LG Group in 2003.↓↓2nd generationKoo Ja-gyungHuh Joon-guKoo Ja-gyung, the eldest son of Koo In-hoi, was appointed as LG Group's chairman in 1970.Huh Joon-gu was the third son of Huh Man-jung↓↓3rd generationKoo Bon-mooHuh Chang-sooKoo Bon-moo, the eldest son of Koo Ja-kyung, was appointed as LG Group's chairman in 1995.Huh Chang-soo founded GS Group by separating the petrochemical/retail distribution businesses from LG Group in 2004.↓↓4th generationKoo Gwang-mo-Koo Gwang-mo, the adopted son of Koo Bon-moo (his biological father is Koo Bon-neung, Koo Bon-moo's younger brother), will soon be appointed as LG Group's chairman.Source: Multiple news reports (re-edited by Sanghyun Park)(LG Group holding structure - Courtesy LG Corp.)Koo Gwang-mo has already secured a 6.12% stake in LG Corp through multiple equity transfer/swap processes since 2004. It is almost certain that he will inherit Koo Bon-moo's 11.06% stake along with his biological father's 3.39% stake. So, his total shareholding in the LG Group's holding company will eventually increase to at least 20.57%. Combined with the stake owned by the other family members, his controlling stake will still be about 45% which of course can be said 'quite stable'.LG Corp major shareholder detail (as of May 18, 2018)RelationCommon shares ownedTotal shares ownedShareholding %Common shareholding %Koo Bon-mooMajor shareholder19,458,16919,458,16911.0611.28Koo Bon-joonKoo Bon-moo's brother13,317,44813,317,4487.577.72Koo Gwang-mo4th gen successor10,759,71510,759,7156.126.24Koo Bon-sikKoo Bon-moo's brother7,728,6017,728,6014.394.48Kim Young-sikKoo Bon-moo's wife7,253,1007,253,1004.124.20Koo Bon-neungKoo Bon-moo's brother &amp; Koo Gwang-mo's biological father5,955,0325,955,0323.393.45Choi Byung-minSpecial affiliate person591,594591,5940.340.34Koo Mi-jungSpecial affiliate person1,359,6001,359,6000.770.79Koo Bon-gilSpecial affiliate person312,020312,0200.180.18Koo Bon-youngSpecial affiliate person53,50053,5000.030.03Koo Yeon-gyungSpecial affiliate person1,566,2791,566,2790.890.91Koo Yeon-suSpecial affiliate person265,064265,0640.150.15Koo Yeon-jaeSpecial affiliate person450,386450,3860.260.26Koo Ja-gyungSpecial affiliate person1,648,8871,648,8870.940.96Koo Ja-youngSpecial affiliate person611,531611,5310.350.35Koo Hyun-moSpecial affiliate person129,654129,6540.070.08Koo Hyung-moSpecial affiliate person1,041,8571,041,8570.590.60Koo Hwon-miSpecial affiliate person477,533477,5330.270.28Kim Seo-youngSpecial affiliate person15,86015,8600.010.01Kim Seo-eunSpecial affiliate person190,460190,4600.110.11Kim Seon-jungSpecial affiliate person175,587175,5870.100.10Kim Seon-hyeSpecial affiliate person1,299,8511,299,8510.740.75Kim Eun-miSpecial affiliate person94,29994,2990.050.05Kim Joo-youngSpecial affiliate person2,3002,3000.000.00Yoo Woong-seonSpecial affiliate person84,95584,9550.050.05Yoo Jun-seonSpecial affiliate person57,22457,2240.030.03Yoo Hee-youngSpecial affiliate person117,093117,0930.070.07Lee Wook-jinSpecial affiliate person1,091,7651,091,7650.620.63Lee Jae-wonSpecial affiliate person185,875185,8750.110.11Choi Hyun-sooSpecial affiliate person3,9323,9320.000.00LG Yeonam AcademySpecial affiliate person3,675,7423,675,7422.092.13LG Yeonam Cultural FoundationSpecial affiliate person572,525572,5250.330.33Total owned by the major shareholder and his special affiliate persons-80,547,43880,547,43845.8046.68Source: KRX FIND

LG Corp

LG그룹 승계 프로세스 요약