Planned succession influences share prices of firms related to LG Group heir

SEOUL, May 21 (Yonhap) -- Shares of South Korean companies linked to the likely heir of LG Group fluctuated Monday following the death of the group chairman, while major LG affiliates remained relatively stable.

On Sunday, LG Group Chairman Koo Bon-moo died at the age of 73, having undergone several operations for a brain tumor since last year.

The tycoon's passing opens the door to the country's fourth-largest business entity shifting to a new leadership -- presumably to heir apparent Koo Kwang-mo, 40, who is currently an executive at LG Electronics.

Kwang-mo is the son of the late chief's younger brother, Koo Bon-neung, but was adopted in 2004 by the late Koo in accordance with the group's long-held principle of handing over the reins of the business group to the chairman's eldest son. The late Koo lost his only biological son in a car accident in the 1990s.

On Monday, KleanNara Co., a South Korean manufacturer of paper and hygiene products, rallied 29.96 percent to 7,070 won (US$6.51). The firm's largest shareholder is Heesung Electronics Co., an affiliate of Heesung Group that is controlled by Koo Bon-neung.

Bolak Co., a manufacturer of food ingredients and pharmaceutical raw materials, surged 14.69 percent to 4,215 won. The company is headed by Chung Kie-ryun, who is the successor Koo's father-in-law.

"Investors, mostly retailers, appeared to pick up those shares, hoping for positive effects of Koo Kwang-mo's taking the helm of LG Group," said Lee Sang-hun, an analyst at Hi Investment & Securities.

"But no direct business linkage exists, and their bull run could be short-lived," he added.

In contrast, investors showed no signs of anxiety in trading shares of LG's major affiliates,

Tech firm LG Electronics rose 0.71 percent to 98,700 won on Monday, while LG Chem retreated 1.6 percent to 338,500 won.

The group's holding company, LG Corp., shed 1.13 percent to 78,900 won, and LG Display lost 1.1 percent to 22,500 won.

"Under its holding firm structure, LG has maintained a relatively stable structure, and the succession plan was already well known in the market. So the transition itself would not affect the shares of LG firms very much," Lee noted.

Other analysts pointed to the multi million-dollar inheritance-related tax as a market-moving factor. The younger Koo needs to pay roughly 1 trillion won worth of tax if he takes over an 11.28 percent stake held by the deceased corporate chief.

"How the tax payment will be dealt with in the future could affect investor sentiment, but the new chief's managerial abilities and performances by the group's key affiliates will be key in the long run," KB Securities expert Ryu Yong-seok said.

Last week, the younger Koo was named a member of the group's board, subject to shareholder approval at a general meeting due next week. The company said in a statement that the appointment is, in part, in preparation for the succession process.

graceoh@yna.co.kr
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