[BizHanKook] Sempio Group is ending its holding company structure after 10 years. It has decided to pursue a "reverse merger," in which the holding company, Sempio, will be absorbed into its operating subsidiary, Sempio Foods. Through this merger, Sempio Foods is expected to expand its investment capacity by inheriting the assets held by the holding company. In particular, as the company plans to strengthen its investment foundation to expand overseas operations, attention is focusing on the management performance of 4th-generation owner Executive Director Park Yong-hak (48) in the international market.
Sempio: “Merger to Enhance Mid-to-Long-Term Investment Capacity and Management Efficiency”
Sempio and Sempio Foods announced on October 30 that their respective boards of directors had decided on the merger. The operating subsidiary, Sempio Foods, will absorb the holding company, Sempio, and once the merger is complete, Sempio will cease to exist, leaving only Sempio Foods.
Sempio had split into a holding company, Sempio, and an operating company, Sempio Foods, in July 2016 to improve management efficiency and transparency. At the time, many companies in the food industry were shifting to holding company structures, driven by government tax incentives.
The reason Sempio is opting for a reverse merger after about 10 years is due to the uncertainty surrounding its status as a holding company and its listing requirements. In 2017, the government raised the minimum total asset requirement for holding companies under the Fair Trade Act from 100 billion won to 500 billion won, granting existing holding companies a 10-year grace period. However, Sempio’s separate total assets as of the end of June this year stood at 225.6 billion won, falling short of the revised criteria. Consequently, it was expected to lose its holding company status when the grace period ends on June 30 next year.
The issue is that if it loses its status as a holding company, the revenue criteria used to determine whether it maintains its listing will change. Currently, it is evaluated based on consolidated financial statements, but once it transitions to a general listed company, revenue will be evaluated based on separate financial statements.
Furthermore, when new accounting standards are applied starting in 2027, equity method gains, which were previously included in operating revenue, will be excluded from operating income. Sempio’s separate revenue for the first half of this year, excluding equity method gains, was approximately 760 million won—well below the 5 billion won revenue threshold required to maintain a listing. The company explained that this could expose them to risks such as being designated as an administrative issue or potential delisting.
Sempio states that it is pursuing the merger to resolve uncertainties caused by these institutional changes and to maintain investment continuity for existing shareholders. Sempio and Sempio Foods stated, "The merger is being pursued to enhance mid-to-long-term investment capacity and management efficiency by integrating the assets, financial resources, investment/management functions, and manufacturing/sales functions of both companies, with Sempio Foods remaining as the surviving entity."
This merger will also lead to changes in governance. With the holding company Sempio, which currently holds a 49.40% stake in Sempio Foods, ceasing to exist, CEO Park Jin-sun (76) will become a direct major shareholder of Sempio Foods. CEO Park’s estimated stake immediately after the merger is 23.41%, which is expected to rise to 31.51% once the 2,255,842 treasury shares inherited during the merger process are retired.
Plan to Expand Overseas Investment… Will Profitability Improve?
There are expectations that Sempio Foods’ investment capacity will also increase after the merger. This is because the company will gain more resources to utilize for investment by inheriting the cash-equivalent assets previously held by Sempio. As of the end of June this year, Sempio’s separate cash-equivalent assets stood at approximately 35.3 billion won, which is expected to help reduce the need for external borrowing and the burden of financial costs after the merger.
The company plans to use the resources secured through the merger to expand production facilities and strengthen its competitiveness in overseas businesses. A Sempio Foods representative stated, "We are planning mid-to-long-term investments in production infrastructure to stably respond to rising domestic and international demand, such as the construction of a new factory in Jecheon. Through this, we intend to preemptively secure the production capacity needed for global business expansion and strengthen our production base to respond flexibly to changes in market demand."
As Sempio Foods plans to expand its investment in overseas business after the merger, attention is also focused on whether these investments will lead to improved profitability in the future. While Sempio Foods has steadily increased its overseas sales, it has yet to achieve clear results in terms of profitability, as its local subsidiaries continue to record losses.
Sempio Foods sells traditional fermented products such as soy sauce and gochujang, as well as its cooking essence "Yondu" and various sauces overseas. In the first half of this year, overseas sales on a consolidated basis reached 35.9 billion won, a 15.2% increase compared to the same period last year. However, overseas sales still account for a low 17.6% of total revenue.
The overseas business is led by 4th-generation owner Park Yong-hak, Executive Director at Sempio Foods. Born in 1978, Executive Director Park joined Sempio Foods in November 2017 and has been in charge of overseas business. Following his promotion to Executive Director in July 2024, he is expanding his role in global operations, recently taking on the position of CEO of Sempio Food Services (SFS), the local U.S. subsidiary.
The U.S. subsidiary, where Executive Director Park recently took over as CEO, is still recording losses. SFS’s revenue for the first half of this year was 14.2 billion won, a 9.3% increase compared to the same period last year, but its operating loss widened from 780 million won to 980 million won. In other words, despite the increase in revenue, the scale of the loss has grown.
A Sempio Foods representative explained, "Marketing investments to expand local staff, broaden distribution channels, and raise brand awareness have impacted profitability. Currently, we are in an investment phase for mid-to-long-term growth, and we plan to improve profitability through revenue growth resulting from expanded distribution networks and the streamlining of business operations."
With Executive Director Park’s management responsibilities increasing significantly now that he is also the CEO of the U.S. subsidiary, improving the profitability of local operations has emerged as a key task. As it is expected that the resources available for overseas projects will increase due to this merger, all eyes are on whether the expanded investment capacity can be translated into tangible management results.
A Sempio Foods representative stated, "This merger is a decision to strengthen the foundation for mid-to-long-term growth centered on the operating company, Sempio Foods. Regarding overseas business, we will continue to pursue the expansion of global distribution networks and the cultivation of new markets based on our existing business strategies."