This article was displayed on the ChosunBiz MoneyMove (MM) site at 2:12 p.m. on Jan. 5, 2026.
As SNT Group has launched a hostile merger and acquisition (M&A) bid for control of domestic machine tool company SMEC, criticism is emerging that the group showed a contradictory stance in faulting SMEC's largest shareholder for disposing of treasury shares.
The point is that SNT Group, instead of canceling its own treasury shares in the past, issued exchangeable bonds (EB) to line up funds for acquiring SMEC, while criticizing SMEC for selling its treasury shares to friendly parties to defend control.
According to the investment banking (IB) industry on the 5th, SNT Holdings urged SMEC to fully withdraw its treasury share disposal plan after SMEC decided on a large-scale disposal on the 29th, saying it "constitutes a breach of trust-type act" and that "although the disposal of treasury shares is nominally for employee compensation or strategic alliances, in substance it can only be seen as a transaction aimed at strengthening the voting rights of the existing controlling shareholder."
The reason SNT Group reacted sharply is that on the same day, SMEC disclosed it would sell 770,000 treasury shares to Manho Rope & Wire at a 5% discount to the previous day's close to build a strategic alliance, donate 1 million treasury shares free of charge to the employee stock ownership association, and at the same time dispose of 907,031 treasury shares to 67 association members at a 20% discount.
Treasury shares do not carry voting rights, but once sold, the rights are revived, so controversy over loopholes always follows. Because management can use treasury shares to grant voting rights to those they favor, it violates the principle of shareholder equality, and since incumbent management uses corporate assets to keep their positions, calls for institutional reform have been steady.
Separate from criticism of SMEC's response, some say SNT Group is in no position to criticize. For SMEC, which SNT Group needs to seize the board at the regular shareholders meeting in March, the decision is unwelcome. The SMEC board, consisting of six members—two inside directors including Chief Executive Choi Young-seop and four outside directors—faces the expiration of all terms in March next year. With this disposal of treasury shares, the stake including friendly holdings has reached 18.66%.
Apart from criticism of SMEC's handling, there is also the argument that SNT Group is not in a position to fault them. Instead of canceling its treasury shares to return profits to shareholders, SNT Group has sold them to private equity fund (PEF) managers to secure practical benefits. The fact that the funds so raised were used to secure SMEC equity is also a point of criticism.
In July last year, SNT Dynamics and SNT Holdings each issued EB backed by their treasury shares—110 billion won and 20 billion won, respectively—to IMM Credit & Solutions, a credit fund manager. For small shareholders, it meant losing the opportunity for immediate share price support through treasury share cancellation while only heightening overhang (large potential sell supply) concerns. ICS has already recouped more than 80% of its principal by selling SNT Group shares in the market.
On the 25th of last month, SNT Holdings disclosed it would change the purpose of holding SMEC shares from "simple investment" to "aimed at influencing management control," stating it is the largest shareholder with about 20.2% of SMEC shares. This came as SMEC teamed up with private equity firm RILSON Private Equity to acquire HYUNDAI WIA's machine tool division for 340 billion won.
An SNT Holdings official said, "The EB issuance backed by treasury shares was carried out with the objectives of strengthening the holding company structure and securing funds for new technology investment, issued at a 10% premium to the reference share price without refixing, with a 0% coupon and a 1% yield to maturity," adding, "At the time the exchangeable bond payment was made, SNT Holdings had already secured a 14.74% equity stake in SMEC."
SMEC, established in 1999 after being spun off from Samsung Heavy Industries' machine tool division, focuses on CNC lathes and machining centers that cut or slice metal to produce precision parts. As of 2024, with sales of 201.3 billion won and operating profit of 24 billion won, it was Korea's No. 3 machine tool company, but it rose to No. 2 by acquiring HYUNDAI WIA's machine tool division.