U.S. hedge fund launches activist campaign against LG’s planned spin-off

(Reuters) – U.S.-based hedge fund Whitebox Advisors LLC publicly opposed a spin-off plan by South Korea’s LG Corp, saying the plan “sacrifices minority shareholder return in order to resolve a family succession issue”.

LG Corp said in November it would spin off five affiliates into a new holding company next year, the latest reorganisation at one of South Korea’s family-led conglomerates as they pass to a new generation of leaders.

Analysts expected the new holding firm, to be headed by Koo Bon-joon, a son of LG’s founder, will eventually be separated from LG Corp. LG Corp itself is led by Koo Bon-joon’s nephew Koo Kwang-mo, who took over as LG Group chairman in 2018 after his father died.

“The spin-off does nothing to address LG’s most pressing issue, which is the unprecedented discount at which the company trades relative to its assets and, accordingly, inferior return to shareholders,” Whitebox, which manages about $5.5 billion in assets, said.

“We are deeply dismayed that the purported rationale for this transaction is to support Koo Bon-joon in developing his own business group,” it added.

Whitebox called for LG to stop current plans and propose a new spin-off that “maximises value for all shareholders”, create a corporate governance committee, and implement a capital management plan.

LG said shareholder value can be enhanced by the spin-off and independent management of businesses which have low strategic priority in the current LG Group but have high growth potential, which will allow their reevaluation by the market.

It will also offer options for shareholders including a share buyback, LG said in a statement.

Whitebox did not say how much of LG it owns, only that it is a “long-term shareholder” that has sought to contact LG’s board and management in the past two years. The shareholders meeting for the proposal is expected in late March.

LG Corp shares were flat in morning trade compared with a 0.3% decline in the wider market.