Tongyang Group

The Tongyang Group was founded in 1957 as a cement manufacturer by Lee Yang-gu. Lee had previously used the Tongyang name in his Tongyang Confectionery Manufacturing Company, which he started after coming from his native South Hamgyong Province (in what is today North Korea) to Seoul in 1947. His commercial success led to his being dubbed the "Sugar King", and he used his own capital to take over a cement factory in Samcheok, Gangwon Province; its owners at the time were eager to sell due to frequent labour disputes and the poor state of the physical plant. That factory had started operations in 1942 under the ownership of Onoda Cement (now Taiheiyo Cement) during Japanese colonial rule over Korea. Lee searched out former Onoda engineers in order to rehire them, in particular Oh Pyong-ho, "supposedly the only competent cement engineer in post-colonial South Korea"; Oh accepted the job offer. Lee then began repairs to the facilities with the aid of engineers from Germany's Polysius Company, resolved the labour disputes, and revamped the recruiting programmes; he hired heavily from the local Samcheok High School, and many of his new hires' fathers had worked for Onoda in the past. The South Korean cement industry experienced a boom in the mid-1970s. Hyun Jae-hyun, the husband of Lee Yang-gu's eldest daughter Lee Hae-kyung, abandoned his previous career as a prosecutor to join Tongyang Cement in 1977, and oversaw the Tongyang Group's expansion from cement into a wide variety of other fields, particularly in financial services in the 1980s. He was promoted to group chairman in 1989. By 2009, financial services subsidiaries such as Tongyang Life Insurance and Tongyang Securities contributed more than seven-tenths of the Tongyang Group's sales. The group faced a cash shortage in September 2013, leading to doubts about its ability to repay debts maturing at the end of the month; NICE Investors Service estimated that it needed to raise ₩800 billion to survive. It was reported that the group would issue securities backed by the assets of key subsidiaries, and then liquidate them. On 30 September 2013, Tongyang Group failed to pay back more than ₩100 billion in debt, and officially filed for court receivership for three of its subsidiaries: Tongyang Corp., Tongyang International, and Tongyang Leisure. The list of subsidiaries in receivership soon expanded to five with the addition of Tongyang Networks and Tongyang Cement. == Subsidiaries in 2014 ==

In 2013, according to its organisational chart, the Tongyang Group had 17 South Korean subsidiaries in the field of manufacturing, seven in the field of financial services, and six offering other services. Group members also have foreign subsidiaries or representative offices in various Asian countries including Cambodia, China, Japan, Indonesia, Vietnam, and in countries of the Americas including Argentina, Colombia, and the United States. Tongyang Cement, Tongyang Power, and Tongyang Securities were called the "key subsidiaries" of the Tongyang Group. Tongyang Cement & Energy Tongyang Cement & Energy (; ) went into court receivership on 1 October 2013, and the Korea Exchange suspended trading of its shares. In September 2015, Sampyo Group and a Korea Development Bank private equity fund acquired a 55% stake in the company for ₩794 billion, and renamed it Sampyo Cement in April 2017. Tongyang Networks Tongyang Networks (; ) went into court receivership on 1 October 2013. Hanil Synthetic Fiber Hanil Synthetic Fiber (), a textiles company, was founded in 1964, but went into court receivership after the 1997 Asian financial crisis. Tong Yang Major acquired Hanil Synthetic Fiber in 2007. The acquisition resulted in an investigation to determine whether the ₩374.5 billion acquisition had violated laws against leveraged buyouts. Tong Yang Major had created a special purpose vehicle which issued debt to finance the acquisition of Hanil, and then used Hanil's cash reserves to repay much of the debt. However, the trial court disagreed with prosecutors that this was a breach of fiduciary duty by Tong Yang Major directors or that this had resulted in economic harm to Hanil. Both an appellate court and the Supreme Court of South Korea upheld the trial court's ruling. == Subsidiaries sold in 2013 and 2014 ==

Tongyang Power Tongyang Power () is an electricity generation company. In September 2013, it was owned 55.02% by Tongyang Cement, 19.99% by Tongyang Corp., and 24.99% by Tongyang Leisure. In January 2013, Tongyang Power made what would ultimately be a successful bid to build and operate a two million kilowatt, ₩10 trillion powerplant in Samcheok, Gangwon Province, proposing to use an abandoned mine owned by Tongyang Cement. During Tongyang Group's late 2013 crisis, the group had initially planned to sell only a minority stake in Tongyang Power, with the aim of raising funds so they could carry through with the construction of the Samcheok plant. However, by late September 2013, group officials expressed their willingness to sell the entire company; one stated, "Survival of the group comes first over everything else. We will give up anything to save the group." Tongyang Securities Tongyang Securities (; ) is a brokerage and financial services company. It was known as Ilguk Securities until 1984, when the Tongyang Group purchased it and renamed it to its present name. Within five years it had become one of the top ten securities companies in the country. Tongyang Securities has overseas representative offices in Beijing, Ho Chi Minh City, Hong Kong, New York City, Phnom Penh, and Tokyo. By January 2014, roughly 600 employees had chosen to leave the company. The Tongyang Group made efforts to sell Tongyang Securities in order to raise funds and pay back debts, but Tongyang Securities' prospects for a sale were said to be far poorer than sister company Tongyang Power, both due to decreased profitability and because Woori Investment & Securities was also being sold and so competed with it for potential acquirers. An investigation by the Financial Supervisory Service found evidence of fraud by Tongyang Securities, amidst accusations by individual investors that Tongyang Securities had sold them bonds of Tongyang Group companies without properly informing them of the risks. The FSS report found that Hyun had "compelled" Tongyang Securities to sell those bonds, while Tongyang Securities CEO Jung Jin-seok had lied to employees about Tongyang's financial condition in an effort to encourage them to sell more Tongyang bonds. More than 800 affected customers filed a class-action lawsuit against the Tongyang Group and South Korean regulators in January 2014, seeking restitution of their losses. In July 2014, Yuanta Securities of Taiwan bought out 53.61% of Tongyang Securities from Tongyang International and Leisure. Yuanta appointed Hwang Wei-cherng as a new co-CEO alongside then-current CEO Suh Myung-suk, and indicated that Tongyang Securities would rename itself and begin using the Yuanta brand name. == Subsidiaries sold before 2013 ==

=== Orion Group === The Orion Group, formerly a subsidiary, was spun off in 2001; its chairman Tam Chul-kon is Tongyang Group chairman Hyun Jae-hyun's brother-in-law. Among Orion's major subsidiaries is Orion (formerly Tongyang Confectionery), a major snacks manufacturer whose products include Choco Pies. The Tongyang Orions, the Tongyang Group's Korean Basketball League team based in Daegu at the time, also came under Orion Group ownership, and officially dropped the "Tongyang" from their name starting from the 2003–04 season. Tongyang Life Insurance Tongyang Life Insurance (; ) is a life insurance company with the Tongyang brand name. The Vogo Fund, a private equity fund, reached a deal to increase its stake in Tongyang Life Insurance from 13.5% to 60% in November 2010 for ₩900 billion. In March 2011, when the purchase actually went through, Vogo acquired only an additional 44.05% of the company, with Atinum Partners CEO Lee Min-joo purchasing the remainder of the amount that Vogo had originally agreed to purchase. Afterwards, it was less closely connected to the Tongyang Group than other group members, though it continued to use the Tongyang name, and also held 4.25 million shares in Tongyang Inc. However, in the aftermath of the Tongyang Group's late 2013 crisis, Tongyang Life still saw an outflow of customers, and moved to decrease its remaining ties to the rest of the group. By late October 2013, Tongyang Life stated that it had sold all of its shares in Tongyang Inc.; by that point Tongyang Life had almost no shareholding ties to the rest of the group, with Tongyang Securities owning only a 3% stake in Tongyang Life and group chairman Hyun Jae-hyun owning another 1,283 shares. Tongyang Life was also reportedly seeking to change its name. == References ==