The Korea Capital Market Institute and the Korean Securities Association held a joint symposium on the theme of "Directions for improving M&A systems to enhance shareholder value" at Bulls Hall on the 3rd floor of the Geumto Center in Yeouido, Seoul, on the afternoon of the 17th. With regard to three rounds of Commercial Act amendment debates over the past year, academics, financial authorities, and industry officials gathered to discuss improvements.
Kwon Dae-young, vice chair of the Financial Services Commission, who delivered congratulatory remarks, presented the government's position that the introduction of a mandatory tender offer system is necessary. "We should improve or quickly introduce a mandatory tender offer system so that ordinary shareholders can share in the control premium that arises in stock transfer-type M&A," Kwon said. Citing his experience during public service with the SK Group control dispute and the Citibank–Hanmi Bank tender offer case, Kwon added, "There is a need to fix the tender offer provisions themselves as they stand now."
After the congratulatory remarks, presentations followed by Hwang Hyun-young, a research fellow at JASIYEON, and Kim Woo-chan, a professor at the Korea University Business School. Hwang raised the need for follow-up legislation, including detailing the board opinion disclosure as a result of liberalizing merger valuation methods and introducing a right to maintain mergers and merger inspectors. Hwang also emphasized that as voluntary delistings using tender offers and comprehensive stock exchanges increase, stronger disclosures to protect minority shareholders and measures to secure price fairness are needed.
Professor Kim Woo-chan, drawing on an empirical analysis of 41 countries that have adopted mandatory tender offer systems, said, "There is no substance to the argument that the market for corporate takeovers will shrink." Instead of the "50%+1 share" tender offer plan under review by the Financial Services Commission (FSC), Kim proposed a plan to tender for all remaining shares. He also suggested that, to prevent low-price discriminatory purchases after adoption, the mandatory tender offer pricing period should be set long, as in the United Kingdom, at 12 months, and that an acceptance condition be imposed to invalidate the tender offer itself if 50% or more of outstanding shares are not purchased through the offer.
In the ensuing panel discussion, points of contention continued over system design. Jung Jun-hyuk, a professor at Seoul National University School of Law, said, "Mandatory tender offers are triggered only when the largest shareholder changes—that is the international standard," noting that exceptions for rehabilitating corporations are important. Jung proposed establishing a body like a "takeover panel," as in the United Kingdom and Sweden, that can issue swift authoritative interpretations.
Go Il-hun, a research fellow at JASIYEON, introduced Japan's past case of abolishing exceptions to tender offers in the 50%–66% equity range on the grounds that they infringed ordinary shareholders' exit rights, saying it warrants reference.
Representing the private equity fund (PEF) industry, Lee Cheol-min, CEO of VIG Partners, expressed concern that "if the introduction of a mandatory tender offer system increases the required capital size, domestic PEFs will inevitably be at a disadvantage compared with foreign PEFs with stronger financing power." Lee argued, "If we are to strengthen the mandatory tender offer system, delisting should be made that much easier," adding that the two systems should be discussed together.
Attorney Kim Mok-hong of BAE, KIM & LEE LLC also said, based on practical experience, "With last year's Commercial Act amendment expanding directors' duty of loyalty to shareholders, board resolutions for comprehensive stock exchanges have themselves become burdensome," adding that there is a need to ease the current delisting threshold, which is around 95%.
In response, Professor Kim Woo-chan offered a different view, saying, "If a mandatory tender offer system is introduced, all shareholders can sell at the same premium, which will actually make delisting easier." On the basis for the 25% trigger equity ratio, Kim argued, "In Korea's reality, SK Square effectively exercises control over SK hynix with just a 20% equity stake."
Kim Mi-jung, head of the Fair Market Division at the Financial Services Commission (FSC), said, "No less important than the mandatory tender offer ratio is ensuring that sufficient information is provided to the market during the tender offer process," adding that guidance is being prepared for disclosures on the background and progress at the M&A proposal stage. Kim added that the FSC is also reviewing a plan to require boards to submit opinions on the fairness of the offer price in tender offers, not just in mergers.
Wrapping up the discussion, Lee Jun-seo, a professor in the Department of Business Administration at Dongguk University, said, "A system must be put in place to ensure ordinary shareholders do not lose out during industry restructuring." Meanwhile, full-fledged legislative debates on the mandatory tender offer system are expected to begin in the National Assembly as early as the second half of the year.