The Democratic Party of Korea met with the eight major business groups and announced plans to introduce a mandatory tender offer as a follow-up to the mandatory retirement of treasury shares. Accepting concerns that corporations could be exposed to hostile mergers and acquisitions (M&A) due to the mandatory retirement of treasury shares, it proposed the mandatory tender offer as an alternative. The business community also expressed a positive stance on the mandatory tender offer.
The Democratic Party of Korea's "KOSPI 5000 special committee" and the "task force for rationalizing criminal penalties and civil liability in the economy (TF)" held a meeting on the 11th at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul, with the Korea Chamber of Commerce and Industry, The Federation of Korean Industries, Korea Enterprises Federation, Korea International Trade Association, Korea Federation of Small and Medium Enterprises, Korea Listed Companies Association, Korea Association for Middle Market Enterprises, and KOSDAQ Association—the eight major business groups.
The meeting focused on the mandatory retirement of treasury shares and the abolition of the crime of breach of trust. Among these, questions from the business community concentrated on the mandatory retirement of treasury shares. The business community's position is that if treasury shares, a tool for domestic corporations to defend managerial control, must be retired, they could be exposed to hostile M&A led by overseas speculative capital.
The Democratic Party's proposed tool to defend managerial control is a mandatory tender offer. Under a mandatory tender offer, when acquiring 25% or more of an equity stake in a listed company, the buyer must purchase not only the controlling shareholder's equity but also a certain percentage of the ordinary shareholders' equity. Because the buyer must purchase ordinary shareholders' equity at the same price paid to the controlling shareholder, M&A expense increases.
Oh Ki-hyeong, the Democratic Party lawmaker who chairs the KOSPI 5000 special committee, met with reporters after the meeting and said, "The business community is asking for a defensive tool to replace treasury shares as a defense of managerial control," adding, "Because a mandatory tender offer increases the expense of hostile M&A, doesn't it, in effect, function as a defense against hostile M&A?"
The mandatory tender offer ratio has not been decided. Within the Democratic Party, a bill to amend the Financial Investment Services and Capital Markets Act has been introduced that includes a 100% mandatory tender offer for remaining equity. In contrast, the Financial Services Commission (FSC) is reviewing a plan requiring the purchase of a majority—"50% plus one share"—of the total equity.
Oh said, "Depending on what percentage is set as the standard for the (remaining equity purchase ratio) and how the 'plus alpha' is defined, there will be various effects," adding, "In that sense, management circles actually asked for the mandatory tender offer to be introduced quickly."