The securities registration statement for the absorption merger of HD Hyundai Construction Equipment and HD Hyundai Infracore has passed the threshold of the Financial Supervisory Service. With the schedules for the shareholders meeting and others remaining, maintaining the stock price level will likely be crucial to minimize the exercise of the 'claim' rights.
HD Hyundai Construction Equipment announced that the securities registration statement for the merger with HD Hyundai Infracore came into effect on the 28th. After submitting the securities registration statement on July 2 and making three corrections, the merger procedure can now proceed as planned.
HD Hyundai Construction Equipment and HD Hyundai Infracore will hold an extraordinary shareholders meeting on Sept. 16 to approve the merger plan and apply for the merger registration on Jan. 2, 2026, with the listing of newly issued shares set for the 26th of the same month.
The first hurdle is the shareholders meeting. In the case of the merger approval agenda, it falls under 'special resolution items.' It requires the approval of at least two-thirds of the voting rights of shareholders present at the meeting and more than one-third of the total issued shares.
Considering the equity ratios and the market's positive assessment of the merger effect between the two companies, the likelihood of passing the shareholders meeting is high. The equity ratio of related parties, including HD Hyundai XiteSolution, the intermediate holding company in the construction machinery sector of HD Hyundai Group, stands at 41.06% for HD Hyundai Construction Equipment and 34.88% for HD Hyundai Infracore.
The remaining task is the 'claim' rights. The 'claim' rights allow shareholders opposed to resolutions at the shareholders meeting that significantly affect shareholder interests, such as mergers, to demand that the company buy back their shares.
To exercise the 'claim' rights, shareholders of HD Hyundai Construction Equipment or HD Hyundai Infracore must submit their intention to oppose the merger from the 29th until just before the extraordinary shareholders meeting on Sept. 16. If the merger agenda is passed at the shareholders meeting, they may apply for the 'claim' from the same day until Oct. 10. If Oct. 10 is designated as a temporary holiday, the exercise period for the 'claim' rights will extend to Oct. 13.
The issue is that the maximum amounts for exercising the 'claim' rights are tight, with HD Hyundai Construction Equipment at 150 billion won and HD Hyundai Infracore at 250 billion won. If opposing shareholders request a quantity of shares exceeding these amounts, the company may need to secure additional funds through borrowing or other means.
In simpler terms, the number of shares for exercising the 'claim' rights must be less than 1,985,572 shares for HD Hyundai Construction Equipment and 21,034,918 shares for HD Hyundai Infracore. This represents a volume of about 11.1% relative to the circulating share count of both companies.
To proceed with the merger without a hitch, the stock prices of HD Hyundai Construction Equipment and HD Hyundai Infracore must remain above the price offered by the company for share buybacks. If the prices drop below this level, there will likely be many shareholders wishing to exercise their 'claim' rights. The buyback prices set by the company are 75,545 won for HD Hyundai Construction Equipment and 11,885 won for HD Hyundai Infracore.
As of 10:25 a.m. on that day, the stock price of HD Hyundai Construction Equipment was 87,800 won, while that of HD Hyundai Infracore was 14,110 won. These prices are 16.2% and 18.7% higher than the respective buyback prices set by the company. However, as there were eight trading days in July after the merger announcement where the stock prices fell below the company's buyback prices, the stock price trend in the remaining period is critical.
Currently, the most significant factor affecting the stock prices of HD Hyundai Construction Equipment and HD Hyundai Infracore is the situation regarding the Russia-Ukraine war. Both companies have been seen as beneficiaries of reconstruction, with stock prices soaring during ceasefire talks, but plummeting when hostilities intensify.
A researcher in construction machinery at a securities firm noted, 'It is crucial for the merger of the two companies that the Russia-Ukraine war does not escalate during the remaining period.'
HD Hyundai Group presented a blueprint to achieve sales of more than 14.8 trillion won by 2030, focusing on construction equipment as the main business of the merged entity, tentatively named 'HD Construction Equipment,' as well as on engines and maintenance businesses.