LG Group, the fourth-largest conglomerate in South Korea, is set to split off multiple affiliates with the former chief’s sibling, according to industry sources on Monday.

Koo Bon-joon, an uncle of current LG Chairman Koo Kwang-mo and younger brother of late former Chairman Koo Bon-moo, is preparing to take control of multiple affiliates.

The affiliates expected to be separated from the group are LG International Corp., LG Hausys Ltd., and Pantos Co., according to news reports.

It is projected that Koo would establish a business group that will be taking control of the affiliates.

Koo, who is currently serving as an advisor to LG Group, is likely to utilize his 7.72 percent stake in LG Corp. as a financial source to make his own group. The stake is estimated to be worth around 1 trillion won ($902.1 million), and Koo might use it to acquire LG International and Hausys. 

The market capitalizations of LG International and LG Hausys are 715.1 billion won and 585.6 billion won, respectively.

Last year, LG International sold the company’s stake in LG Twin Tower to LG Corp. The company moved out from the headquarters building in Yeouido to an LG building in Gwanghwamun, central Seoul.

It looks like Current Chairman Koo Kwang-mo has been preparing for the spin-off as well.

The chairman’s family sold a combined 19.9 percent stake in Pantos, the subsidiary of LG International, as part of the plan in December 2018.

LG Corp., the holding company of LG Group, currently holds a 25 percent stake in LG International, a trading affiliate of the group, and a 34 percent stake in LG Hausys, a major construction material maker.

A likely scenario is that LG Corp. and Koo swap the stakes in the affiliates.

“To raise the corporate value, the group is currently reviewing multiple plans, but nothing has been confirmed yet,” a group official said.

Regarding the matter, LG Group will reportedly convene a board meeting later this month. 

Split-offs of affiliates has been a long-time tradition in the LG family.

The tradition goes as the eldest son of the group chief inherits management power of the conglomerate after the former chief’s death, while allowing brothers of the late chief to create their own business entities.

Past spin-offs created conglomerates like LS Group, LIG Group and Heesung Group under the tradition.

Some industry watchers there could be more affiliates to spin off from LG Group.

A growing speculation is that Koo Bon-joon could also take over Silicon Works, LG’s fabless chip design company, and LG MMA Corp., a chemical material manufacturer.

If the spin-off plan goes smoothly, LG Group would put a greater focus on the electronics, displays, chemicals, telecommunications and household care businesses.

“Koo’s spin-off centering on the trading company seems to keep LG’s main businesses like electronics and chemicals within the group,” explained an industry insider. ”And this would be the last split-off of LG Group, since there are no owner family members participating in management.”

By Song Su-hyun (song@heraldcorp.com)