Demerging a business structure into holding and operating entities has become a kind of fad for listed Korean companies since last year, but the reorganization fell short of boosting their shares as investors found it more instrumental for hereditary succession in the family-run business than improving corporate value and management efficiency.

Last year five members of the Korea Exchange - Wonik IPS Co., Ildong Pharmaceutical Co., Suprema Inc., Sempio Foods Co., and Huons Co. - reorganized their structure by separating holding and business entities. They relisted shares under separate stocks. Additional firms - Advanced Process Systems Corp., Ubiquoss Inc., and KoMiCo Ltd - went through similar procedure this year.

Shares of these companies mostly benefited upon the news of spinoff on expectations for improvement in the way the businesses are run.

The five have been relisted into 10 stocks. Prices of nine have fallen from the closing before the spinoff. Wonik IPS was the sole gainer. The stock skyrocketed 44.3 percent since reentry in May last year.

Stock prices of Huons Global (holding) and Huons (business) tumbled 56.4 percent and 45.9 percent, respectively, Ildong Holdings lost 41.4 percent. Ubiquoss and KoMiCo awaiting relisting fell 2.0 percent and 18.4 percent, respectively.

Their stock losses underscore investors’ suspicion and disillusionment in the spinoff purpose. Demerger into holding and business entities would have helped to strengthen competitiveness of the business companies by removing poor assets. But the scheme turns out to have served more to facilitate hereditary succession in family-owned companies.

Still, spinoff will become more active this year. Last month, Korea’s confectionery giant Crown-Haitai Confectionery Group finished the process to split Crown Confectionery into Crown Haitai Holdings and business unit Crown Confectionery, and the stocks will be relisted Tuesday. Hyundai Heavy Industries broken up into four will rejoin the main bourse next month and Samsung Electronics Inc. is mulling similar reorganization. Maeil Dairy Industry Co., Orion Corp., Innox Corp, Jeil Pharmaceutical Co., Dongkuk Pharmaceutical Co. Kyungdong City Gas, Fine MD, and Miwon Specialty Chemical Co. are readying similar facelift.

By Chung Woo-sung

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