South Korea’s conglomerate LS Group is speeding up its plan to simplify corporate governance and improve shareholders’ value by turning its city gas supplying unit Yesco Co. into a holding company after spinning off the unit’s mainstay city gas business.

Yesco said in a regulatory filing on Friday that its shareholders approved a plan to convert the company into a holding company after demerging its city gas business into a separate operating entity during an extraordinary meeting. After the split, the new operating entity, tentatively named as Yesco, will be placed under new holding company Yesco Holdings as a subsidiary, according to the filing.

Yesco - a distributor of liquefied natural gas (LNG) in Korea - is former Kukdong City Gas Co. founded in 1981, and it has been using current name since 2006. The LS-affiliated company supplies LNG to nine districts in Seoul including Jung, Gwangjin, and Seongdong districts, and to three cities including Guri and Namyangju in Gyeonggi Province.

After the separation is completed, new holding company Yesco Holdings will be in charge of subsidiary management and new project investment as well as other remaining businesses while the new operating entity Yesco will continue to be engaged in city gas supplying and gas equipment sale businesses. Personal computer assembly business also will be put under Yesco.

The latest move to reorganize its governance structure is expected to speed up Yesco’s decision-making process and help to stabilize its city gas business by lowering management risk at each business unit. The spinoff will simplify Yesco’s corporate governance, allowing it to enhance responsibility management and business transparency, the company expected.

Following Yesco’s breakup into a holding company structure, LS Group will have two holding entities - LS Holdings Co. and Yesco Holdings. LS Group is also rumored to be considering another spinoff plan to turn its natural gas company E1 Corp. into a holding company structure, which would let the conglomerate to be managed by three holding companies. This would allow the owner family of LS Group to hold only shares of the holding companies without having ownership in other units. Market analysts expect this process would help enhance transparency in the group’s corporate governance.

An unnamed official from E1 said the company has been reviewing a plan to convert into a holding company, but no details including timing and procedures have been confirmed yet.

Yesco’s demerge plan come after LS Group has been putting out efforts to simply its management structure. Earlier this year, LS Holdings absorbed Gaon Cable Co. to prevent the company from being target of the country’s enhanced monopoly regulation.

By Lee Dong-in and Lee Eun-joo

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