A BETTER LG Whitebox Advisors Presentation - MARCH 2021 - A Better ...
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A BETTER LG Whitebox Advisors Presentation MARCH 2021 www.ABetterLG.com
DISCLAIMER
THIS PRESENTATION IS FOR DISCUSSION AND GENERAL INFORMATIONAL PURPOSES ONLY. IT DOES NOT HAVE REGARD TO THE SPECIFIC INVESTMENT OBJECTIVE, FINANCIAL SITUATION,
SUITABILITY OR THE PARTICULAR NEED OF ANY SPECIFIC PERSON WHO MAY RECEIVE THIS PRESENTATION, AND SHOULD NOT BE TAKEN AS ADVICE ON THE MERITS OF ANY INVESTMENT
DECISION. THIS PRESENTATION IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY INTERESTS IN ANY FUND, ACCOUNT OR INVESTMENT VEHICLE MANAGED BY WHITEBOX
ADVISORS LLC (“WHITEBOX”) AND IS BEING PROVIDED FOR INFORMATIONAL PURPOSES ONLY. THE VIEWS EXPRESSED HEREIN REPRESENT THE OPINIONS OF WHITEBOX, AND ARE BASED ON
PUBLICLY AVAILABLE INFORMATION WITH RESPECT TO LG CORPORATION (“LG” OR THE “COMPANY”). CERTAIN FINANCIAL INFORMATION AND DATA USED HEREIN HAVE BEEN DERIVED OR
OBTAINED FROM PUBLIC FILINGS, INCLUDING FILINGS MADE BY THE COMPANY WITH REGULATORS, AND OTHER SOURCES.
THIS PRESENTATION 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 GENERAL MEETING OF SHAREHOLDERS SCHEDULED TO BE HELD
ON MARCH 26, 2021 (THE “MEETING”). WHITEBOX IS BY NO MEANS SOLICITING OR REQUESTING OTHER SHAREHOLDERS TO GRANT OR DELIVER THEIR PROXIES TO WHITEBOX FOR THE
MEETING. SHAREHOLDERS SHALL EXERCISE THEIR VOTING RIGHTS INDEPENDENTLY BASED ON THEIR OWN INDEPENDENT JUDGEMENT AND DECISION MAKING PROCESSES.
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FROM STATEMENTS MADE OR PUBLISHED BY THIRD PARTIES. ANY SUCH STATEMENTS OR INFORMATION SHOULD NOT BE VIEWED AS INDICATING THE SUPPORT OF SUCH THIRD PARTY FOR
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OF FURNISHING THIS PRESENTATION.
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS ADDRESSED IN THIS PRESENTATION ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE CERTAIN RISKS
AND UNCERTAINTIES. YOU SHOULD BE AWARE THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS.
WHITEBOX SHALL NOT BE RESPONSIBLE OR HAVE ANY LIABILITY FOR ANY MISINFORMATION CONTAINED IN ANY THIRD PARTY FILING OR THIRD PARTY REPORT RELIED UPON IN GOOD FAITH
BY WHITEBOX THAT IS INCORPORATED INTO THIS PRESENTATION. THERE IS NO ASSURANCE OR GUARANTEE WITH RESPECT TO THE PRICES AT WHICH ANY SECURITIES OF THE COMPANY
WILL TRADE, AND SUCH SECURITIES MAY NOT TRADE AT PRICES THAT MAY BE IMPLIED HEREIN. THE ESTIMATES, PROJECTIONS AND PRO FORMA INFORMATION SET FORTH HEREIN ARE BASED
ON ASSUMPTIONS WHICH WHITEBOX BELIEVES TO BE REASONABLE, BUT THERE CAN BE NO ASSURANCE OR GUARANTEE THAT ACTUAL RESULTS OR PERFORMANCE OF THE COMPANY WILL
NOT DIFFER, AND SUCH DIFFERENCES MAY BE MATERIAL. THIS PRESENTATION DOES NOT RECOMMEND THE PURCHASE OR SALE OF ANY SECURITY.
WHITEBOX RESERVES THE RIGHT TO CHANGE ANY OF ITS OPINIONS EXPRESSED HEREIN AT ANY TIME AS IT DEEMS APPROPRIATE. WHITEBOX DISCLAIMS ANY OBLIGATION TO UPDATE THE
INFORMATION CONTAINED HEREIN.
ALL REGISTERED OR UNREGISTERED SERVICE MARKS, TRADEMARKS AND TRADE NAMES REFERRED TO IN THIS PRESENTATION ARE THE PROPERTY OF THEIR RESPECTIVE OWNERS, AND
WHITEBOX’S USE HEREIN DOES NOT IMPLY AN AFFILIATION WITH, OR ENDORSEMENT BY, THE OWNERS OF THESE SERVICE MARKS, TRADEMARKS AND TRADE NAMES.
UNDER NO CIRCUMSTANCES IS THIS PRESENTATION TO BE USED OR CONSIDERED AS AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY.
2
TABLE OF CONTENTS
Executive Summary
Why the Spin-Off Should Be Opposed
Misalignment Between the Controlling Family and
Minority Shareholders
Deficient Corporate Governance Practices
Conclusion: How to Build a Better LG
3EXECUTIVE SUMMARY www.ABetterLG.com
ABOUT LG
LG is a Korean conglomerate primarily comprised of holdings in listed companies and cash
Company Snapshot (KRX: 003550)
LG shares trade at a 66% discount to its asset value
Founded in 1947, LG is the fourth largest Korean
Conglomerate by market capitalisation LG Corp Sum of the Parts Market Cap LG Value to LG Value per LG % of Share
• 87% of its value consists of cash and holdings in listed
Businesses (KRWbn) Ownership (KRWbn) share (KRW) Price
LG CHEM LTD 62,898 30% 20,969 121,519 130%
companies that have their own management and LG ELECTRONICS INC 24,384 30% 8,209 47,573 51%
Board of Directors LG HOUSEHOLD & HEALTH CARE 23,505 30% 8,000 46,360 50%
LG UPLUS CORP 5,239 38% 1,991 11,538 12%
• LG’s operating revenue consists of dividend income LG HAUSYS LTD 642 34% 240 1,391 1%
from its subsidiaries, brand royalties and rental income LG INTERNATIONAL CORP 1,048 25% 259 1,500 2%
from subsidiaries SILICON WORKS CO LTD 1,090 33% 360 2,089 2%
LG MMA (book value) 50% 115 668 1%
• Key subsidiaries consist of: Cash to NewCo 146 845 1%
• LG Chem: worth 130% of LG’s share price Other Businesses 2,501 14,492 16%
Brand 2,207 12,787 14%
• LG Electronics: worth 51% of LG’s share price Property 1,506 8,727 9%
• LG H&H : worth 50% of LG’s share price Total Business value 46,503 269,491 289%
Net Cash 1,504 8,716 9%
Total Asset Value 48,007 278,207 298%
LG Corp Market Cap 16,100 93,300 100%
Ownership Structure Discount to market value -66% -66%
The Koo Family holds 46% of LG Corp shares, valued at
KRW 7.4 trillion
• The holding company structure allows the Koo
Family to control KRW 118.8 trillion in publicly
listed assets with its KRW 7.4 trillion investment
Source: Bloomberg, Morgan Stanley, company data. *LG ownership %. Listed holding values calculated using current market prices. Figures as of 2 March 2021. 5ABOUT WHITEBOX
Whitebox is a meaningful, long-term shareholder of LG
• Whitebox is a multi-strategy alternative asset manager with more than $5.5 billion in assets under management
• Founded in 1999, Whitebox invests across asset classes, geographies and markets through the hedge fund vehicles and
institutional accounts it advises
• Whitebox’s Equity team invests in three core strategies, with the largest by assets being holding companies
• Whitebox’s portfolio managers have invested in holding companies in a variety of geographic locations for over three
decades (public examples below), making HoldCos a core investment strategy for Whitebox
6LG’S SPIN-OFF CREATES A MINI CONGLOMERATE TO BE CHAIRED BY KOO BON-JOON
Non-core assets will be transferred into a new holding company (“NewCo”) and spun off to LG shareholders
Koo Kwang-mo Koo Bon-joon
Chairman Chairman
66%
LG Corp discounted NewCo
Mkt. Cap: KRW 16,100 billion
Mkt. Cap: KRW 376 billion
LG’s Stated Rationale:
ELECTRONICS CHEMICALS TELECOM & SERVICES
LG Electronics LG Chem Uplus
1. Portfolio Optimization ELECTRONICS CHEMICALS TELECOM & SERVICES
Silicon Works Hausys International
LG Display LG H&H CNS 2. Value Uplift MMA
LG Innotek Hausys GIIR
Silicon Works MMA S&I 3. Partnership
Others Others International
Others
Net Asset Value: KRW 48,007 billion Net Asset Value: KRW 1,121 billion
Source: LG, Bloomberg, Whitebox estimates. Figures as of 2 March 2021. 7WHITEBOX STRONGLY OPPOSES THE SPIN-OFF TRANSACTION BECAUSE IT FAILS TO ENHANCE
CORPORATE VALUE AND PERPETUATES THE UNPRECEDENTED DISCOUNT TO NAV
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, and 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 proposal, 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 minority shareholder return in order to
resolve a family succession issue
8LOCAL MEDIA AND ANALYSTS AGREE THE PRIMARY OBJECTIVE OF LG’S SPIN-OFF IS TO
RESOLVE A SUCCESSION ISSUE AND LACKS CONSIDERATION FOR MINORITY SHAREHOLDERS
November 2020 November 2020
Spinoff to give LG chairman's uncle his own conglomerate “Why are they setting up a new holdco? We think it could be
“The spinoff is not unusual for LG considering the for the business separation within the major shareholder
conglomerate’s history of the first son taking on the family family”
business and handing over subsidiaries to other male family
members, creating an increasingly diverse network of separate “In our view, the brand royalty may decline for LG Corp after
companies run by a very extended family.” 2022 because the new holdco will have a new brand name”
“The potential for capital management talks remains, but we
think its capital management plan announcement will be after
finishing the spin-off process”
November 2020
“During the Q&A session, the CFO acknowledged that
there is a high chance of a share swap among controlling
family members after the spin-off, and this seems to be December 2020
part of LG Group affiliate separation (similar to the GS/LS “The move was considered an initial step for Bon-joon to
group case in the mid-2000s)” establish his own business group”
9WE WANT TO HELP BUILD A BETTER LG FOR ALL SHAREHOLDERS AND STAKEHOLDERS
To help urgently restore investor trust and improve the Company’s standing in the investment community, we believe
LG should take the following actions in the near-term:
Immediately Abandon the Proposed Spin-Off
LG should cease the current transaction as constructed and delay all succession planning until the share
price of LG more accurately reflects the value of its assets
Establish a Corporate Governance Committee
The Board should create a Corporate Governance Committee – comprised of truly independent directors
with minority shareholder representation – to assess material corporate actions and related party
transactions to ensure all shareholders are treated equally and fairly
Prioritize the Implementation of a Capital Management Plan
The Board should prioritize the implementation of a Capital Management Plan to address one of the
largest discounts to asset value of any major publicly traded company globally – LG’s Capital
Management Plan has been delayed time and again, despite its importance to unlocking corporate value
10WHY THE SPIN-OFF SHOULD BE OPPOSED www.ABetterLG.com
THE SPIN-OFF AS STRUCTURED IS NOT CREDIBLE
A Spin-Off where one discounted conglomerate is converted into two discounted conglomerates achieves nothing
Spin-offs create value for shareholders when: The economic benefits of a corporate action –
like the Spin-Off – must be clear because there
• The spun off assets are worth more as are significant costs associated:
independent entities than as part of a
conglomerate • Transaction costs: Advisory fees, legal fees,
OR potential dis-synergies
• The surviving company is sufficiently • Opportunity costs: Loss compared to more
streamlined through the transaction favorable transactions such as direct
distributions, third party disposals, or other
strategic initiatives
This is not a credible Spin-Off:
• Reputational costs: Any damage to the perceived
• By creating a new mini-conglomerate, LG has quality of corporate governance tends to be
foregone the opportunity to create value reflected in a wider discount to NAV
• 98% of LG’s assets remain in situ
12THE SPIN-OFF DOES NOT CREATE VALUE FOR LG OR ITS MINORITY SHAREHOLDERS
LG’s purported rationale for the Spin-Off is not credible
• Spinning off 2% of assets does little to streamline LG
o It is unlikely these businesses are a material draw on management resources
o Three out of four affiliates are publicly listed companies with their own management and Board of Directors
• The creation of a new conglomerate negates any benefit from spinning out independent assets
o We anticipate that KRW 1,121 billion of asset value will trade at a market value of KRW 376 billion, in line with LG’s discount
o Like LG, NewCo will be a controlled entity with the appointment of a family member as Chairman
• The spun-off entities derive from different LG Core Business Areas and have no obvious synergies, raising suspicion that the
transaction as structured reflects the interests of Koo Bon-joon and Koo Kwang-mo
o The Solidarity for Economic Reform issued a report on January 19, 2021, “Analysis of the Effects of Corporate Restructuring,
including Spin-off: Focusing on LG Chem Ltd and LG Corp,” that supports the contention that this Spin-Off is completely unrelated
to the interests of minority shareholders
13THE SPIN-OFF MATERIALLY REDUCES THE COMPANY’S ABILITY TO INVEST GOING FORWARD
Though the Spin-Off impacts only 2.3% of LG’s assets, it disproportionately reduces LG’s revenue by 10.2% and cash by
8.8%, reducing its ability to invest in and develop new technologies
The Spin-Off sacrifices
Movement of Assets (KRW billion) Current RemainCo % Total SpinCo % Total
Net Asset Value 48,009.4 46,885.9 97.7% 1,120.7 2.3% ~17% of
dividend
revenue
Revenue (FY2019) 874.7 785.3 89.8% 89.4 10.2%
of which: Dividends 476.2 396.6 83.3% 79.6 16.7% ~4% of
royalty
of which: Royalty Revenue 270.6 260.7 96.3% 9.8 3.6% revenue
of which: Rental Income 127.9 127.9 100.0% 0.0%
~9% of
Cash 1,649.9 1,504.0 91.2% 145.9 8.8% cash
balance
Source: LG, Bloomberg, Whitebox estimates. Figures as of 2 March 2021. 14NEWCO WILL TRADE AT A SIGNIFICANT DISCOUNT TO THE VALUE OF ITS ASSETS
We believe creating a new controlled entity will cost shareholders KRW 745 billion
• NewCo will trade at a significant discount to its NAV due to the nature of the holding company structure
o The average Korean holding company trades at a discount to NAV of 54%
o LG currently trades at a 66% discount to NAV
o Typically, smaller market cap holding companies trade at wider discounts than large, liquid holding companies
• In our view, prioritizing a structure that facilitates an easy transfer of control will result in foregone value of KRW 745 billion
o The quantum of the likely discount means that these assets will be worth 60-70% less in a holding company than they would under
diversified ownership
Pro-Forma NewCo
NewCo Sum of the Parts NewCo
Market Cap Ownership Value to NewCo Value per NewCo
Businesses (KRWbn) (%) (KRWbn) share (KRW) % of NAV
LG HAUSYS LTD 642 34% 240 3,147 21%
LG INTERNATIONAL CORP 1,048 25% 259 3,394 23% KRW 745 billion lost
SILICON WORKS CO LTD 1,090 33% 360 4,726 32%
LG MMA (book value) 50% 115 1,512 10%
Total Business Value 975 12,779 87%
Net Cash 146 1912 13%
Total NewCo Value (NAV) 1121 14,692 100%
Target Discount to NAV -66% -66%
Market Value of NewCo 376 4,927
Source: NH Investment report, 11 January 2021. Pro-Forma NewCo calculated as of 2 March 2021. 15INVESTORS WERE CLEARLY DISAPPOINTED BY NEWS OF THE SPIN-OFF
LG underperformed the KOSPI by 6.5% on the day the transaction was announced, with the discount to NAV reaching an
all-time wide of 70%, confirming the market’s negative view of the Spin-Off
LG’s Discount to NAV
(40)
(45) The discount only
recovered after the
announcement of
(50) LG Electronics’ JV
with Magna and the
disposal of the
(55) mobile business
(60)
(65)
(70)
1/2/2017 7/2/2017 1/2/2018 7/2/2018 1/2/2019 7/2/2019 1/2/2020 7/2/2020 1/2/2021
Spin-Off Announcement
Source: Bloomberg. Calculated as of 2 March 2021. 16MISALIGNMENT BETWEEN THE CONTROLLING FAMILY AND MINORITY SHAREHOLDERS www.ABetterLG.com
THE MOST URGENT ISSUE LG FACES IS THE UNPRECEDENTED DISCOUNT AT WHICH ITS
SHARES TRADE
Korean conglomerates trade at some of the widest discounts to NAV globally, which is widely attributed to a
misalignment of interests between controlling and minority shareholders
70%
Korean Conglomerate Discount to NAV
60%
Average = 54%
50%
40%
30%
20%
10%
0%
LG SCT Lotte SK KCC Hanwha CJ Doosan LS
LG currently trades at the widest discount to NAV among its peer group
Source: Bloomberg; CLSA. Calculated as 2 March 2021. 18DUE TO THE DISCOUNT, SHAREHOLDERS HAVE NOT PARTICIPATED IN THE PERFORMANCE
OF LG’S UNDERLYING ASSETS
Despite the impressive performance of LG Chem and LG Electronics over the past three years, LG shares have lagged
Share Price and NAV Performance* 180
• LG’s minority shareholders have not
160
+47%
benefitted from the strong underlying
+47% performance of the Company’s assets
140 Value
Gap
KRW • If an investor bought $100 worth of shares in
LG in January 2018, those shares would be
120
32
+5%
+5% trillion worth $105 today
100
80
• If instead, that investor had bought $100 in
the underlying assets of LG, it would be worth
60
$147 today
40 • LG shareholders have seen a 5% increase in
the value of their shareholding, despite a 47%
increase in value of net assets
NAV Share Price
Today, there is a KRW 32 trillion gap between the value of LG’s assets and its market capitalization
Source: Bloomberg, Morgan Stanley. Rebased to Jan 2018. Calculated as of 2 March 2021. 19THE SPIN-OFF HIGHLIGHTS THE CONFLICT BETWEEN THE CONTROLLING FAMILY AND
MINORITY SHAREHOLDERS
We believe that the Spin-Off was conceived as a solution to a succession problem – reflecting an agency problem at LG –
and that the proposed structure facilitates a change of control of NewCo rather than maximizing corporate value
• A share swap may occur post Spin-Off to allow Koo
Koo Family and Affiliates
Bon-joon, the Chairman of NewCo, to increase his
46%
shareholding in NewCo
• Assuming NewCo trades at a similar discount to NAV
as LG, Koo Bon-joon can acquire all of the affiliates’
shares in NewCo with only 12% of his holding in LG
Family Minority • This would give Koo Bon-joon 46% control of NewCo
Koo Kwang-mo Koo Bon-joon
Affiliates Shareholders
15.95% 7.72%
22.33% 54%
and leave him with a 6.8% stake in LG
• The Spin-Off demonstrates a significant conflict
of interest between the Board and LG’s minority
shareholders
20KOREAN MEDIA AGREES THE PRIMARY OBJECTIVE OF LG’S SPIN-OFF IS TO RESOLVE A
FAMILY SUCCESSION ISSUE
21LG PRIORITIZING THE PRIVATE INTERESTS OF THE FAMILY UNDERMINES TRUST AND
EXACERBATES THE COMPANY’S DISCOUNT TO NAV
The discount to NAV at which a holding company trades is directly related to corporate governance and shareholder
value creation
” ”
If weak corporate governance allows owner If investors anticipate the extraction of private
families to favour their own interests over the benefits of control, this will have a negative effect
profitability of some affiliated companies, it is on the price they are willing to pay for the shares
rational for investors to pay less for their shares. of the holding company.
” ”
Explanation for the Holding Company Discount: Theory Explanation for the Holding Company Discount: Theory
and Application, Organisation for Economic and Application, Organisation for Economic
Cooperation and Development (2018) Cooperation and Development (2004)
We believe the Spin-Off demonstrates LG’s priorities are not aligned with minority shareholders
Source: OECD Economic Surveys: Explanation for the Holding Company Discount: Theory and Application (Korea 2018). Marc Deloof and Marc Jegers (January 2004). 22DEFICIENT CORPORATE GOVERNANCE PRACTICES www.ABetterLG.com
THE SPIN-OFF HIGHLIGHTS DEFICIENCIES IN LG’S CORPORATE GOVERNANCE STANDARDS
Rationale for the Spin-Off
Though the transaction is small relative to the size of
Transactions designed to pass corporate assets from one LG, it took considerable time away from the Board
family member to another may be the norm in Korea, and delayed other corporate actions that are seen as
but this is an unacceptable rationale in most jurisdictions crucial to the value of the Company
Board Approval of the Spin-Off
It is clear to us that selling NewCo assets to a third
Received unanimous approval from the Board as it was party would have resulted in superior returns for the
believed to be the best option for the Company and its Company and minority shareholders
shareholders
Change in Control without Corresponding
Mandatory and Chain Bids
In many jurisdictions, this would require a
The likely share swap would result in a change in control mandatory bid for NewCo plus a bid for the
at NewCo if Koo Bon-joon increases his holdings over underlying subsidiaries under the Chain principle
30%, which is likely since Family Affiliates will own 46%
of NewCo
Source: CG Watch 2018, ACGA and CLSA. World Economic Forum, Morgan Stanley Research. 24LG RANKS AS A CORPORATE GOVERNANCE LAGGARD WHEN COMPARED TO GLOBAL BEST
PRACTICES AND EVEN DOMESTIC COMPETITORS
At a time when environmental, social and governance (“ESG”) considerations are at the forefront of investors’ minds
We believe the decision to spin off these assets
demonstrates that LG’s corporate governance practices:
1. Trail domestic competitors
2. Are not consistent with global best practices
3. Fail to represent the interests of shareholders
25LG’S CORPORATE GOVERNANCE PRACTICES TRAIL FAR BEHIND ITS KOREAN PEERS, WHICH
HAVE THE WORST ESG RATINGS IN ALL OF ASIA
The Company’s governance profile compares unfavorably to Samsung C&T Corporation (“SCT”) – whose Vice-Chairman
JY Lee was just sentenced to two and a half years in prison for bribery
LG Samsung C&T
Separate CEO/Chairman No Yes
Committees Audit Audit
Independent Director Nomination Independent Director Nomination
Management
Related Party Transaction
Compensation
Governance
Shareholder Advocate No 2 (one Korean, one non-Korean)
Notice period for AGM 15 days 23 days, target for 4 weeks
Foreign Shareholder English data sent if requested English reference material available on
notification website and sent to key institutional
investors, standing proxies and proxy
advisory firms
Voting results Published in Compliance Report Disclosed on day of meeting, published on
website
LG has a tremendous opportunity to improve its governance profile and lead the way
in Korea for its peers
26WHEN COMPARED TO GLOBAL BEST GOVERNANCE PRACTICES, LG ALSO DISAPPOINTS
If LG followed global best practices, we do not believe the Board would have approved the Spin-Off
Global Best Practice LG Implication
The Board should be chaired by an independent non-executive director (ICGN) Lack of independent oversight and
strategy advisory role
There should be a sufficient mix of directors with relevant knowledge, Unanimous approval of Spin-Off despite
independence, competence, industry experience and diversity of perspectives the universe of potential alternatives and
to generate effective challenges, discussion and objective decision-making possible unaffiliated transactions
(ICGN)
The Board, particularly non-executive directors, should make available Shareholder views not considered
communication channels for meaningful dialogue on governance matters with
shareholders (ICGN)
Remuneration should be designed to effectively align the interests of the CEO No link to Discount to NAV
and executive officers with those of the company and its shareholders (ICGN)
Rights of all shareholders should be equal and must be protected (ICGN) Transactions made for the benefit of
certain shareholders
Source: ICGN Global Governance Principles (see here). 27CONCLUSION: HOW TO BUILD A BETTER LG www.ABetterLG.com
WE WANT TO HELP BUILD A BETTER LG FOR ALL SHAREHOLDERS AND STAKEHOLDERS
To help urgently restore investor trust and improve the Company’s standing in the investment community, we believe
LG should take the following actions in the near-term:
Immediately Abandon the Proposed Spin-Off
LG should cease the current transaction as constructed and delay all succession planning until the share
price of LG more accurately reflects the value of its assets
Establish a Corporate Governance Committee
The Board should create a Corporate Governance Committee – comprised of truly independent directors
with minority shareholder representation – to assess material corporate actions and related party
transactions to ensure all shareholders are treated equally and fairly
Prioritize the Implementation of a Capital Management Plan
The Board should prioritize the implementation of a Capital Management Plan to address one of the
largest discounts to asset value of any major publicly traded company globally – LG’s Capital
Management Plan has been delayed time and again, despite its importance to unlocking corporate value
29THANK YOU
SWaxley@whiteboxadvisors.co.uk
CGroves@whiteboxadvisors.co.uk
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