This article was published on Jan. 2, 2025, at 4:35 p.m. on the CHOSUNBIZ Money Move (MM) site.
Hyosung TNC will hold an extraordinary shareholders' meeting on the 23rd to decide on the transfer of the special gas division of Hyosung Chemical. The reason it must proceed in the form of a transfer rather than purchasing existing shares after physically splitting the division is that this allows Hyosung TNC to avoid joint guarantee for the 3 trillion won liabilities of Hyosung Chemical.
A transfer of business operations is subject to a special resolution at a shareholders' meeting under commercial law. Therefore, both Hyosung TNC and Hyosung Chemical must obtain the agreement of two-thirds of the shareholders present at the extraordinary shareholders' meeting (based on the number of shares). The company believes that this transfer will smoothly pass the special resolution at the shareholders' meetings of both companies.
According to investment banking (IB) industry sources on the 2nd, Hyosung TNC signed a contract to acquire the business operations of the special gas division from Hyosung Chemical for 920 billion won on the 12th of last month. They paid 138 billion won as a deposit on the 19th of the same month, with the remaining 782 billion won due by the end of this month.
Initially, it was reported that Hyosung Chemical intended to establish a special purpose company (SPC) to transfer the special gas business in the form of a transfer of business operations and then sell the SPC's equity to the IMM PE-Stick Investment Consortium. However, the direction changed to Hyosung TNC directly acquiring the special gas division without establishing the SPC, as its subsidiary took on the role of the acquirer.
Transferring the division directly without an SPC is not particularly advantageous in terms of time or expenses. A capital market attorney noted, 'Transferring through an SPC takes only about a week' and added, 'I don't see any particularly significant advantages to transferring the division directly.'
Rather, it creates the inconvenience for Hyosung TNC that it must secure a special resolution from the shareholders' meeting. To acquire the equity of the SPC, it would only need a board resolution; however, for the transfer of business operations, it must obtain the consent of two-thirds of the shareholders present at the meeting (based on the number of shares) and more than one-third of the total issued shares (based on the number of shares). Commercial law Article 374 stipulates that 'to transfer all or a significant portion of a business, and to acquire all or a portion of another company’s business that has a significant impact on the company’s business, a special resolution is required.' Therefore, from Hyosung Chemical's perspective, whether transferring the special gas business to an SPC or directly to Hyosung TNC, it still requires a special resolution at the shareholders' meeting.
In response, a representative from Hyosung stated, 'We wanted to be clear that we have received sufficient consent from shareholders by going through the special resolution process.' This indicates that they aim to secure justification in advance considering potential pushback from shareholders.
Currently, Hyosung TNC’s equity is held 42.63% by the largest shareholders, including the Hyosung holding company and Chairman Cho Hyun-jun. It originally held 41.63% but increased its equity gradually by buying shares slightly as stock prices fell last month. The National Pension Service holds 6.85%, while the remainder is presumed to be held by minority shareholders.
A representative from Hyosung noted, 'While the possibility of the transfer being rejected is not completely absent since it is subject to a special resolution, given that recent stock trends have been favorable and there seems to be no significant opposition among shareholders, it appears there will be no major issues for approval.'
Hyosung TNC has decided to grant shareholders opposing the transfer the right of claim for shares. The price is 226,713 won. However, since the current share price is 229,000 won, which is higher than the price for the right of claim, and due to the business structure of Hyosung TNC suggesting a higher possibility of stock price appreciation, industry sources speculate that not many shareholders will actually exercise the claim. Hyosung TNC derives 70% of its total revenue from exports, indicating it is likely to benefit in a strong U.S. dollar environment. If opposing shareholders exercise their right of claim and sell their shares, those shares will be converted into treasury stock for Hyosung TNC.