Hunt for M&A Targets

Reelected POSCO Chairman Lee says POSCO needs to beef up size through M&As

POSCO Chairman and CEO Lee Ku-taek has been reelected for another term as head of the country's largest steel maker at the shareholders'meeting Feb. 23, the company said.
The CEO candidate recommendation committee recommended Chairman Lee as the only candidate to take over the helm of the steel maker when his current term expires. The shareholders also approved the extension of President Yoon Seok-man for another term as recommended by the director candidate recommendation committee.Vice President Chung Joon-yang has also been retained. The CEO recommendation committee was made of 9 outside directors to make the work of candidate recommendation transparent and just. The shareholders also approved the appointment of three new outside directors, Chung Gwang-woo, former vice chairman of Woori Financial Holdings, Park Won-soon, director of the Beautiful Foundation and Jeffrey Jones, former Amcham president in Korea. Director Jones will serve on the auditing committee. The recommendation committee said they have been retained in recognition of their work to expand the growth of POSCO with
sound-level of profits during their tenures, their performances in relation to steering the company well in an ever changing environment of the steel industry around the world often characterized by the hostile M&As and the successful advances into India, Vietnam, China and Mexico to secure a sustainable growth base and the company's acute need for a continuous and stable management team work.
The chairman reported at the annual meeting his management plan of the 5th largest steel maker in the world by saying that he will strive to make POSCO the largest steel maker in Asia.
He said POSCO's total crude steel production capacity will increase to 50 million tons per year with the high-grade production rate reaching 70 percent and the self-sufficiency rate of iron ores 30 percent. In order to achieve the target, he will stress global management, ethical management, and fostering leadership, he said.
Chairman Lee said any firm in the world can become a target of hostile M&A attempts and in order for POSCO to remain independent without being taken over by other firms, it has to have strategies to defend itself from such attempts, possibly taking over steel makers in China or even in Japan.
He said the company has to beef up its size in order to survive, pointing out that the company has already made advances into China,India, Mexico and Vietnam. POSCO's possible targets for its M&As would be in China or Japan, the countries with similar cultural background, not in Europe nor the United States. Since China forbids foreigners from taking over the management of its strategic industries such as steel mills, POSCO's M&A attempts to take over a Chinese steel maker would have to be a long-term project.
The board of directors also discussed the matters concerning the training future CEOs of the steel maker as a step to make POSCO a global concern. It has decided to set up a CEO training committee following more detailed discussion on the matter in the near future.
Alliance with SeAh Steel
POSCO forged an alliance with SeAh Steel over the production of American Petroleum Institute(API) specification steel plates and other products in the areas of technical cooperation, sales and production. The two domestic steelmakers agreed to buy some stakes in each other company to make their alliance more solid. POSCO will buy 10.1 percent of SeAh stakes or 540,000 shares and in return, SeAh will take over the equal value of POSCO shares.
The steelmakers have a 30-year relationship going one as a supplier of raw material and the other as a customer with each boasting best competitive production technologies for steel plates and pipes in the world, creating synergy effects for two partners.
The API specified steel pipes means that they will withstand minus 40 degree Centigrade pressure and won't get rusty. POSCO has been focusing on the production of those steel plates for automobiles. POSCO has been having difficulties with API projects holding biddings for steel pipes, not steel plates and steelmakers in Japan and Europe equipped with the production facilities for steel pipes. With the arrangement with SeAh, POSCO will now be able to boost its competitive edge in marketing hot-rolled coil with API specifications.
Under the tie-up, SeAh Steel will be able to produce high-grade steel products such as special steel pipes, and stainless steel pipes, securing competitive edge over its Chinese rivals in addition to general steel pipes used by construction firms. nw

(from left photo)Chairman & CEO of POSCO Lee Ku-taek, reelected to serve another term at a shareholders'meet Feb. 23. POSCO's CEO recommendation committee in session, which recommended Chairman Lee to serve another term.