HANA Micron, which announced a spin-off plan ahead of PharmaResearch, will hold a shareholders' meeting soon to approve the spin-off. Minor shareholders have reacted against this partitioning decision, calling it a 'barely a spin-off,' and are rallying votes, expecting a showdown at the shareholders' meeting.
HANA Micron shareholders are protesting that this spin-off is a 'trick' to strengthen the control of the largest shareholder. The company explained that it is a decision to improve management efficiency, but minority shareholders argue that only the major shareholder will benefit from the process of transitioning to a holding company system after the spin-off.
Especially since this shareholders' meeting is scheduled right after the passage of a bill aimed at protecting the rights of minority shareholders, there is considerable interest from investors, as PharmaResearch, which recently announced a spin-off, is experiencing a similar controversy. HANA Micron plans to hold a temporary shareholders' meeting on the 16th of this month to vote on the spin-off agenda through a special resolution.
HANA Micron announced earlier this year that it would carry out a spin-off where the holding company, HANA Semiconductor Holdings, will remain as the surviving company, focusing on its core business of semiconductor packaging. The partitioning ratio is 32.5 to the surviving entity and 67.5 to the newly established entity. This means that if an individual holds 100 shares of HANA Micron by July 29, two business days before the new share allocation date (July 31), they will receive 33 shares of HANA Semiconductor Holdings and 67 shares of newly issued HANA Micron afterward.
In a spin-off, existing shareholders receive shares of the new entity according to their existing equity, unlike a partitioning where 100% of the new company's shares revert to the surviving entity, leaving existing shareholders with none. HANA Micron has also decided on a spin-off, so it appears that there will be no disadvantages for existing shareholders, but the situation changes when looking at the procedures following the partitioning.
HANA Micron will transition to a holding company system after the spin-off. To do this, the newly established HANA Micron will proceed with a capital increase through in-kind contributions via a public offering of shares once it is re-listed.
According to the current Fair Trade Act, a holding company must own at least 30% of the shares of a listed subsidiary. However, the equity that HANA Semiconductor Holdings, which will become a holding company after the spin-off, has in HANA Micron is insufficient. The company plans to conduct a public offering targeting all shareholders holding the newly listed HANA Micron shares to meet the holding company establishment requirements, accepting shares contributed in kind and issuing newly issued HANA Semiconductor Holdings shares in return.
If this process occurs, the major shareholder will increase control over the affiliate without additional expense. The company stated in its securities report, 'This will allow the surviving company to reduce its costs for purchasing equity in the new company, and the largest shareholder can enhance their control over the surviving company through the newly allocated shares after the in-kind contributions.'
While it is difficult to accurately predict the future direction of stock prices, historical examples show that the stock prices of operating companies often perform well while those of holding companies tend to be weaker.
The existing shareholders' rebuttal to the company's spin-off plan, calling it 'essentially a partitioning,' stems precisely from this point. The reason physical partitioning, where the core business of a listed affiliate is separated into a separate subsidiary, has been denounced is that major shareholders retain management control and equity while reaping substantial new investment funds, whereas minority shareholders bear the loss of declining stock values.
However, if a decision arises wherein a spin-off assigning shares of the new entity to existing shareholders also benefits the major shareholder while causing losses to minority shareholders in the process of transitioning to a holding company, the argument of minority shareholders is that it is no different from a partitioning.
In this context, the recent spin-off plan of PharmaResearch has also faced criticism from shareholders. PharmaResearch, known for its skin beauty device 'Rejuran,' announced last month its plan to spin off into a holding company (PharmaResearch Holdings) and a business company (PharmaResearch), but controversy arose over the allocation of a much higher partitioning ratio to the holding company than to the business company with significant growth potential.
In relation to this, the company explained, 'This is a spin-off that takes the business unit separately while also allocating shares of the new company to shareholders, and it has been reviewed by the Korea Exchange to confirm it does not fall under overlapping listings.' The company also added, 'After conducting several corporate presentations (IR), we received feedback from multiple institutional investors that there should be no significant issues for this spin-off to pass the shareholders' meeting.'