Hyundai Heavy Industries (HHI) held an extraordinary general meeting in a gymnasium at the University of Ulsan on May 31 to approve the company’s split-up plan and appointment of inside directors for Korea Shipbuilding & Offshore Engineering (KSOE).

Both agenda items were overwhelmingly approved by the shareholders. Of the 51,074,006 shares (72.2% of all shares) represented at the meeting, 99.9% (51,013,145 shares) supported the proposed split-up and 94.4% (48,193,232 shares) did the proposed appointment of inside directors.

With the shareholders’ approval, HHI is now gearing up for a split into the two entities of KSOE, a sub-holding company, and a reorganized HHI.

Going forward, KSOE will position itself as a technology-oriented company focused on support for and investment in subsidiaries as well as R&D for future technologies, while HHI is to concentrate on enhancing its capabilities and competitiveness in the core businesses including shipbuilding, offshore plants, and engines and equipment.

On March 8, HHI and Korea Development Bank (KDB) signed a definitive agreement on the acquisition of Daewoo Shipbuilding & Marine Engineering (DSME) under which KSOE will be established as a sub-holding company spun off from HHI.

Also approved at the meeting was the appointment of Cho Young-cheul, Senior Executive Vice President & CFO of HHI, and Joo Won-ho, Executive Vice President & CTO of HHI, as inside directors of KSOE.

The demerger registration will be completed on June 3, to coincide with KSOE’s board of directors’ meeting to appoint Kwon Oh-gap, Vice Chairman of HHI, as its CEO.

“The fundamental idea behind the split-up is to help HHI take another quantum leap forward by maximizing its competencies and values through synergies created with DSME under the umbrella of our group,” said Han Young-seuk, President & CEO of HHI, in his opening remarks at the shareholders’ meeting. “We will spare no effort to make this business combination a success, and to ensure it contributes to the company’s further growth and development to maximize the shareholder value.”

Following the contemplated split-up and upon all required approvals obtained by KSOE from local and overseas authorities on the business combination, KDB is set to transfer its entire shares in DSME in return for an equity stake in KSOE. This process will allow KSOE to have as subsidiaries the four shipyards of the group: HHI, DSME, Hyundai Mipo Dockyard and Hyundai Samho Heavy Industries.

Institutional Shareholder Services (ISS), the world’s largest proxy advisory firm, and the Korea Corporate Governance Service (KCGS), the local proxy advisory organization, have issued their respective reports supporting approval of the split-up plan, citing the positive impacts this deal would have in terms of technological competitiveness, management efficiency and shareholder value, among others.

Following the transaction, the HHI stock for trading will be renamed KSOE, which will take place without a trading halt.

“Now that the split-up plan has been officially approved by the shareholders, we will strive to build trust between labor and management and to raise the company’s competitiveness to a considerable level in the fastest possible way,” said an official of HHI. “We will also deliver on the promises we made to our people, including job security and the succession of collective bargaining rights.”