[Alpha Biz= Kim Jisun] LS Cable & System (LS C&S) plans to increase its ownership stake in its subsidiary, Gaon Cable, to 90%. The company has significantly raised its stake through two asset contributions since last year. While some market observers have speculated about a potential voluntary delisting, LS C&S has stated that it has no plans to pursue delisting.
According to industry sources on April 25, LS C&S intends to purchase approximately KRW 70 billion worth of Gaon Cable shares on the open market by June 20. LS C&S currently holds an 81.62% stake in Gaon Cable, and if the plan is completed as expected, its stake will rise to 90.2%.
Gaon Cable is one of South Korea’s top three manufacturers specializing in power and communication cables. The company is experiencing growth fueled by rising global demand for power cables. In 2023, Gaon Cable reported sales of KRW 1.727 trillion, up 15.2% year-on-year, while operating profit rose by 3% to KRW 45 billion.
With the controlling shareholder’s stake projected to exceed 90%, speculation has emerged regarding the possibility of a voluntary delisting. Typically, there is little incentive for a controlling shareholder to hold more than 90% of a listed company's shares. If ownership exceeds 95%, the company becomes eligible for voluntary delisting.
Becoming a wholly owned subsidiary would allow LS C&S to more easily restructure its cable operations over the medium to long term, and could enhance LS C&S’s overall corporate value ahead of a potential IPO. LS C&S itself is privately held and is considered a strong IPO candidate within the LS Group.
However, LS C&S has firmly denied any plans for a delisting. A company spokesperson said, "The stock purchase is aimed at supporting the share price," adding, "We have no intention of pursuing a voluntary delisting." LS C&S believes that Gaon Cable’s stock is currently undervalued and is preemptively acquiring shares.
The purchased shares could also be utilized for future mergers and acquisitions (M&A) or large-scale investments. A higher ownership stake would help protect controlling shareholder rights from potential dilution if the company issues new shares to third parties.
At this year's shareholders’ meeting, Gaon Cable amended its articles of incorporation to increase the limit for third-party allotment capital increases from 33% to 50% of the total number of issued shares. The company also raised its convertible bond issuance limit from KRW 50 billion to KRW 500 billion.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
