Presentation Highlights View That LG’s Proposed Spin-Off Perpetuates the Company’s Unaddressed Valuation Gap, Emphasizes Poor Governance and Undermines Shareholder Trust
Urges Shareholders to Visit www.ABetterLG.com to Review our Analysis of the Spin-Off Ahead of the Critical Vote on March 26, 2021
Whitebox Advisors LLC (together with its affiliates, "Whitebox" or "we"), a long-term shareholder of LG Corporation (KRX: 003550) ("LG" or the "Company"), today released a presentation detailing why Whitebox believes the planned spin-off of a newly created holding company comprised of LG’s direct and indirect holdings in LG Hausys, LG MMA, Silicon Works, LG International and Pantos (the "Spin-Off") should be opposed.
As a reminder, Whitebox has announced that it intends to vote AGAINST the Spin-Off at LG’s General Meeting of Shareholders scheduled to be held on March 26, 2021. We invite LG shareholders to view our full presentation here and visit www.ABetterLG.com to sign up for updates.
Our presentation highlights the following issues that we believe shareholders should examine carefully:
Rationale for Opposing the Spin-Off
In our view, the Spin-Off does not achieve its stated objective of enhancing corporate value – instead, value is sacrificed. The Spin-Off does little to streamline LG, disproportionately sacrificing dividends, royalties and cash, while creating a new family-controlled holding company.
The Spin-Off perpetuates LG’s most pressing issue, which is the unprecedented discount at which the Company trades relative to its assets. LG’s discount to net asset value ("NAV") widened to an all-time low of 70% after the announcement of the Spin-Off, reflecting investor exasperation.
The decision to proceed with the Spin-Off reflects poorly on LG’s corporate governance. Despite the universe of potential alternatives and possible unaffiliated transactions, the Board unanimously approved a plan that we believe sacrifices shareholder returns to resolve a family succession issue.
Misalignment Between the Controlling Family and Minority Shareholders
In our view, the Spin-Off demonstrates a significant conflict of interest between the Board of Directors (the "Board") and shareholders.
We believe that the Spin-Off was conceived as a solution to a succession problem and that the proposed structure facilitates a change of control of the new holding company ("NewCo") rather than maximizing corporate value.
We believe a share swap will occur post Spin-Off to allow Koo Bon-joon, the Chairman of NewCo, to substantially increase his shareholding in NewCo.
Deficient Corporate Governance Practices in LG’s Boardroom
We believe the Spin-Off, which received unanimous approval from the Board, highlights deficiencies in LG’s corporate governance standards. If LG followed best practices, we do not believe the Spin-Off would have been approved.
LG ranks as a corporate governance laggard when compared to global best practices and even some domestic competitors at a time when environmental, social and governance considerations are at the forefront of investors’ minds.
Whitebox wants to help build a better LG for all shareholders and stakeholders. We firmly believe the Company can reduce the valuation gap and restore investor trust through improved governance to ultimately become a stronger conglomerate. The first step in doing so – in our view – is for LG to abandon the ill-conceived Spin-Off.
Whitebox is a multi-strategy alternative asset manager that seeks to generate optimal risk-adjusted returns for a diversified base of public institutions, private entities and qualified individuals. Founded in 1999, Whitebox invests across asset classes, geographies, and markets through the funds, vehicles and institutional accounts we advise. The firm manages approximately $5.5 billion in assets and maintains offices in Minneapolis, Austin, New York, London and Sydney.
This communication should not be construed as asking or soliciting shareholders of the Company to authorize Whitebox or any third party to exercise their voting rights on their behalf with respect to the proposals to be presented to shareholders of the Company at the 2021 General Meeting of Shareholders (the "Meeting"). Whitebox is by no means soliciting or requesting other shareholders to grant or deliver their proxies to Whitebox for the Meeting.
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