LS’s Intent Behind Treasury Share Retirement: A Strategy to Thwart Hoban Group?

[Korea Financial Times, Shin Haeju] LS Group’s holding company, LS Corp., announced a plan to reduce its treasury stock ratio to 12% by March 2026 in a bid to enhance shareholder value, but market reaction remains lukewarm.

On August 12, LS declared it would retire 1 million treasury shares, representing 3.1% of its total outstanding stock. The shares will be retired in two phases : 500,000 shares on August 21, with the remaining 500,000 to be retired by the first quarter of 2026. LS currently holds 5,852,462 treasury shares, representing 15.1% of its issued stock.

An LS spokesperson stated, “While pending amendments to the Commercial Act may influence future plans, there is currently no intention to retire additional treasury shares beyond the announced one million.”
Some industry observers speculate that LS’s decision to retire treasury shares is ultimately aimed at defending its management rights against Hoban Group. The two conglomerates are engaged in a shareholding battle, with Hoban acquiring over a 2% stake in LS this March. Although Hoban has yet to surpass the critical 3% threshold—which would grant it rights such as inspecting LS’s accounting books and challenging director misconduct—LS remains on alert.

In particular, Taihan Cable, an affiliate of Hoban Group, and LS Cable are long-standing rivals. In April, LS Cable won a final court ruling against Taihan Cable in a lawsuit over the alleged misappropriation of bus duct technology. More recently, the two companies have been vying for contracts in the “West Coast Energy Highway” national power grid project promoted by the Lee Jae-myung administration.

This forms the basis for analysis that LS’s share retirement move is aimed at boosting its stock price to make it more difficult for Hoban Group to increase its stake. A reduction in the number of shares in circulation typically lifts earnings per share and dividends per share, increasing the likelihood of a higher stock price. This, in turn, can raise the cost for outside players to acquire additional stakes.

Despite this, LS’s share price moved in the opposite direction, closing down 0.58% at KRW 170,200 on August 12. On August 13, the price dipped further to around KRW 167,200 within two hours of market open.

An industry insider commented, “Discussions around amendments to the Commercial Act have been ongoing since the Lee Jae-myung administration took office, so expectations around treasury share retirement for holding companies might have been priced into the shares already.”
Meritz Securities analyst Jang Jae-hyeok described the move as “very positive from a shareholder value perspective,” but noted that, “Since the existing sum-of-the-parts (SOTP) valuation already factors in net asset value and treasury stock in the share count, there is theoretically no change in the fair value per share.”


Earlier in May, LS issued KRW 65 billion worth of exchangeable bonds (EBs) backed by 387,365 treasury shares—equivalent to 1.2% of total shares—subscribed by Korean Air.

This move was widely interpreted as a defensive tactic against Hoban Group’s managerial challenge. Because treasury shares lack voting rights and cannot be used in shareholder meetings, issuing EBs linked to these shares enables LS to establish a friendly controlling interest.
Once Korean Air converts these bonds into shares, it will acquire voting rights, potentially tipping future votes in favor of LS management during proxy battles.

Shin Haeju (hjs0509@fntimes.com)