F&F Holdings' Strategic Investment in Subsidiary F&F

F&F Holdings, the parent company of the F&F Group, has been steadily increasing its stake in its subsidiary, F&F. The stake rose from 31.67% at the end of 2023 to 33.11% as of June 13 this year. During this period, F&F Holdings invested a total of 36,941,950,000 won (approximately $27.364 million) to expand its stake. Notably, on June 3, F&F Holdings purchased 20,000 shares of F&F on the open market, investing 1,292,180,000 won at a price of 64,609 won per share.

Shareholder Return Policy and Dividend Payouts

In February, F&F announced a mid-to-long-term shareholder return policy, committing to use more than 20% of its annual net profit for cash dividends and share buybacks until 2026. This move, according to F&F Holdings, is part of a proactive effort to boost the stock price and return profits to shareholders. F&F, a key player in the fashion industry owning popular brands such as Discovery and MLB, has seen its dividend payouts increase annually. The payouts rose from 42.089 billion won in 2021 to 61.028 billion won in 2022 and 64.843 billion won in 2023. Similarly, F&F Holdings' dividend payouts have also increased, from 6.642 billion won in 2021 to 15.628 billion won in 2023.

Analysts' Views and Ownership Structure

However, some analysts suggest that this move is a strategic effort to maximize dividend income for the owner family and to secure future management control. The ownership structure of F&F reveals that F&F Holdings and the owner family, including F&F Group Chairman Kim Chang-soo, hold a combined 61.94% stake. The owner family's control over F&F Holdings is even stronger, with Chairman Kim and his family owning 91.71% of F&F Holdings. Given this ownership structure, the benefits of policies aimed at enhancing shareholder value, such as increased dividends, are likely to primarily accrue to the owner family. There are suspicions that F&F Holdings is strengthening the owner family's control and laying the groundwork for future management succession.

Controversy and Stock Accumulation Behavior

Moreover, there are skeptical views regarding F&F Holdings' stock accumulation behavior. F&F Holdings tends to reduce its purchase volume when F&F's stock price is high and increase it when the price is low. This can be interpreted as a strategy to expand its stake through low-cost purchases during stock price declines, rather than solely aiming to boost the stock price. The controversy over F&F Holdings' stake increase in F&F is likely to persist between the justification of shareholder returns and the suspicion of owner benefits.