Koo Kwang-mo's LG Group Accelerates Treasury Stock Cancellation... "Strengthening Shareholder Value Enhancement"

[Financial News] LG Group is accelerating the cancellation of treasury stocks to enhance shareholder value. It is interpreted that they are proactively strengthening shareholder value enhancement activities ahead of the government's and ruling party's push to mandate treasury stock cancellation (Commercial Act 3rd Amendment). 
(株)LG announced on the 28th that it will cancel half of its treasury stocks (worth about 250 billion won) held by early next month, and the remaining stocks will be fully canceled next year. Initially, the plan was to cancel a total of 500 billion won worth of treasury stocks by next year, but with half being canceled this year, shareholder enhancement activities are gaining momentum.
The stocks to be canceled this time are 3,029,580 common shares (worth about 250 billion won at purchase price). This accounts for 1.93% of the total common shares. The scheduled cancellation date is September 4. Treasury stock cancellation refers to the permanent elimination of treasury stocks acquired by a company. It has the effect of increasing earnings per share (EPS) by reducing the number of issued shares. It is one of the representative shareholder return policies along with dividends.
Treasury stocks themselves are one of the means of defending management rights. In the event of a hostile merger and acquisition (M&A) attempt, transferring treasury stocks to friendly forces enables the exercise of voting rights. Companies with unstable governance structures may hesitate to cancel treasury stocks for this reason. The business community sees LG's reason for actively canceling treasury stocks as being "in a relatively stable governance structure."

(株)LG previously canceled a total of 60,249 treasury stocks, including 49,828 common shares and 10,421 preferred shares acquired as odd lots during the split process with (株)LX Holdings, on April 29. (株)LG has also completed the acquisition of subsidiary shares to maintain stable management rights and enhance profit structure. From November last year to March this year, it purchased a total of 500 billion won worth of LG Electronics and LG Chem shares, increasing (株)LG's stake in LG Chem from 30.06% to 31.52% and LG Electronics from 30.47% to 31.76%. As the subsidiary's stake increases, dividend income rises, creating a virtuous cycle that returns dividends to (株)LG shareholders.
(株)LG will also conduct its first interim dividend totaling 154.2 billion won. On this day, (株)LG decided to conduct an interim dividend of 1,000 won per common and preferred share. The dividend record date is September 12, and the expected payment date is September 26. Earlier this year, (株)LG's dividend payout ratio recorded the highest level in the country at 76%. It exceeds the dividend levels of global companies (50~60%). Despite a decrease in net profit this year, (株)LG conducted a cash dividend of 3,100 won per common share and 3,150 won per preferred share, the same as last year. (株)LG plans to increase its return on equity (ROE) to 8~10% by 2027 on a consolidated basis. 
LG Electronics also conducted its first-ever treasury stock cancellation (761,427 common shares) last month since its founding. This accounts for 0.5% of the total common shares, worth about 60.2 billion won. LG Electronics also conducted a cash dividend of 500 won per preferred and common share (totaling 90 billion won) as an interim dividend. LG Household & Health Care and LG Uplus also plan to fully cancel their treasury stocks worth 300 billion won each by 2027. 
ehcho@fnnews.com Eunhyo Cho, Reporter