CJ Group Chairman Lee Jay-hyun. / Lee Sun-ho, a general manager of CJ Cheiljedang. / CJ ENM Vice President Lee Kyung-hoo.

CJ Group will spin off the IT business out of CJ Olive Networks and hand it over to CJ Corp., the holding company of the group. In the upcoming process, Lee Sun-ho, a general manager of CJ Cheiljedang and eldest son of CJ Group Chairman Lee Jay-hyun, will receive a stake in CJ Corp. in return for his transfer of a stake in CJ Olive Networks.
The junior Lee’s adding to the shareholders’ register of CJ Corp. ranked on the top hierarchy of the group will be construed as the group’s scheme to groom the junior Lee as a fourth generation heir of the group, analysts said.
CJ Olive Networks consists of the IT business and the Olive Young. CJ Olive Netowrks will spin off the IT business and Olive Young, and the former will be enlisted in a whole-owned subsidiary of CJ Corp. through stock swap.
The stock swap ratio is 1:05444487, and treasury shares will be distributed instead of new shares in consideration of shareholders’ values. CJ Powercast, a wholly owned subsidiary of the existing CJ Olive Networks, will be merged into a wholly owned subsidiary of the spin-off IT business. The IT business and CJ Powercast posted 707 billion won in sales and 47 billion won in operating profit in 2018.
CJ Olive Networks has been forecast to play a key role in transferring the management rights of the group as General Manager Lee of CJ Cheiljedang owns a 17.97 percent stake in the company. CJ ENM Vice President Lee Kyung-hoo, the eldest daughter of Chairman Lee, also has a 6.91 percent stake in CJ Olive Networks
The latest upcoming spin-off and share swap will allow General Manager Lee of CJ Cheiljedang to have a stake in CJ Corp. He is predicted to have a 2.8 percent stake in CJ Corp., followed by CJ ENM Vice President Lee’s 1.2 percent stake.
The spin-off of CJ Olive Networks is believed to not only kick-start a scheme to transfer management rights, but also have a positive effect of cutting down on inside trading. CJ Olive Networks has been under scrutiny of the Fair Trade Commission for higher stakes among group family owners and a rise in inside trading among subsidiaries of the group. CJ Olive Networks earned 372.8 billion won in sales through transactions with CJ Logistics, CJ Cheiljedang and other group subsidiaries.
Given the situation system integration and other IT business sectors are primarily involved in inside trading, the upcoming spin-off of CJ Olive Networks is predicted to bring about a dramatic decline in inside trading.

A view of Seoul Twin City where CJ Olive Networks headquarters is located. (Photos: CJ Group)