Over half of all conglomerates have holding company structure: FTC

A report from the Fair Trade Commission found that over half of all conglomerates had a holding company structure, favored by the government for transparency.

SK Inc. headquarters building in central Seoul [SK INC.]

Over half of all major conglomerates in Korea had a holding company structure last year, according to a report from the Fair Trade Commission (FTC) released Wednesday.

Corporate venture capitals (CVCs) under holding companies carried out investments worth 176.4 billion won ($126.9 million) into 101 companies in total last year, down 16.7 percent on year, the report showed.

The antitrust watchdog found that 46 out of 88 large corporate groups with assets worth 5 trillion won had at least one holding company as of the end of last year.

Four new groups were added to the list since last September, with two — OCI and Dongkuk Steel Mill — transitioning to a holding company structure, and another two — Paradise Group and WonIk — newly designated as major conglomerates by the FTC.

The number of large corporate groups that transitioned to a holding company structure reached 43, up by five from 39 in September.

The government has been encouraging a holding company structure — in which a parent company controls other companies in a hierarchical structure — against cross-shareholding in a bid to enhance transparency in corporate governance.

The total number of holding companies came in at 174 as of the end of last year, compared to 172 in September, with assets worth 2.91 trillion won on average, up 89.9 billion won during the cited period.

SK Group, the second-largest corporate group in Korea, had seven companies classified as a holding company — the most among major conglomerates — including SK Inc., SK Innovation and SKC.

SK Group, which has been expanding its business through aggressive merger and acquisition deals, also has the largest number of subsidiaries and sub-subsidiaries at 219.

The group is currently pushing to streamline its business structure by unloading nonessential affiliates or assets, facing a steep rise in debts due mainly to capital outflow for investments at SK On, an EV battery maker.

In comparison, Samsung has 63 affiliates with no holding company. Considering that a holding company is obligated to own a minimum stake of at least 30 percent in a listed subsidiary, it is expected to cost Samsung a colossal amount of money to transition into a holding company structure.

Meanwhile, the report found that the number of CVCs that handled venture investments under holding companies stood at 13 last year compared to 10 in 2022. The CVCs invested 176.4 billion won in 101 companies last year, down from 211.8 billion won a year prior.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]