E-MART is proceeding with procedures to make Shinsegae Food a wholly owned subsidiary on the premise that it will be delisted. The industry sees this as an effort to eliminate inefficiencies arising from duplicate listings and to reorganize the food and dining businesses.
◇ Business overhaul gains momentum alongside governance cleanup
According to the Financial Supervisory Service's electronic disclosure system on the 23rd, E-MART is pushing for a comprehensive stock exchange to make Shinsegae Food a 100% subsidiary. Once the transaction is completed, Shinsegae Food will begin delisting procedures.
The Financial Supervisory Service previously issued correction orders twice on the securities registration statements related to the comprehensive stock exchange and transfer submitted by E-MART and Shinsegae Food. The aim was to present in more detail the information necessary for investment decisions and the basis for calculating the exchange ratio. The FSS is said to have judged that the stock exchange ratio was inappropriate and that shareholder protection measures were insufficient.
From E-MART's standpoint, it is advantageous to exchange shares when Shinsegae Food's stock price is low. That is because E-MART can acquire Shinsegae Food's shares while issuing fewer E-MART shares. Initially, E-MART planned to secure a 26.91% equity stake in Shinsegae Food (1,042,112 shares) through a share exchange and make it a wholly owned subsidiary. The exchange ratio was calculated at 1 to 0.5031313 based on common shares of E-MART and Shinsegae Food.
However, some minority shareholders say the valuation did not properly reflect the sale last year of Shinsegae Food's institutional catering business division to OURHOME for about 120 billion won. During E-MART's tender offer from December to early January, differing views over the offered price reportedly resulted in applications reaching only about 30% of the target. Even after switching to a comprehensive stock exchange, minority shareholders have continued to push back. Minority shareholder meetings are scheduled for the 24th and on July 7.
E-MART and Shinsegae Food have also postponed the extraordinary shareholders' meeting to June in response to the FSS's request for corrections. An E-MART official said, "E-MART and Shinsegae Food are complying with relevant procedures under current laws and systems," adding, "We will not only supplement relevant details to ensure investors and shareholders receive sufficient information, but also strengthen communication with general (minority) shareholders."
Bringing Shinsegae Food under E-MART as a wholly owned subsidiary is largely a governance cleanup. When both the parent company, E-MART, and its subsidiary, Shinsegae Food, are listed, the capital market can end up double-counting the subsidiary's value or discounting the parent's value. Also, if Shinsegae Food becomes a 100% subsidiary of E-MART, swift business execution becomes possible with only E-MART's board decisions.
It is also seen as having a strong element of business reorganization. After making Shinsegae Food a wholly owned subsidiary, E-MART plans to unify the decision-making structure and raise synergies in the group's food and dining businesses. It aims to break free from the costs and performance burdens of maintaining a listing and focus on a mid- to long-term strategy.
It also aims to wind down noncore businesses and strengthen core ones. E-MART is streamlining the business structure by selling Shinsegae Food's catering business unit and pushing a reorganization centered on three pillars: bakery, food material distribution, and franchises (No Brand Burger). It is also reportedly reviewing expanded investment to broaden bakery B2B (business-to-business) product lines and strengthen competitiveness in food material distribution.
There are also plans to grow No Brand Burger into a core growth pillar. The company is pursuing franchise expansion in parallel, including by introducing a small-store model that lowers startup expenses.
◇ Restructuring accelerates amid regulatory shifts
E-MART's decision to keep pushing the process appears to reflect a judgment about timing. The National Assembly is currently discussing amendments to the Financial Investment Services and Capital Markets Act. The key point is to reflect not only stock prices but also asset value and earnings value when calculating merger consideration.
A retail industry official said, "Given that regulatory reform discussions are speeding up, especially in political circles, E-MART likely felt pressure to move quickly while the existing standards remain in place," adding, "This is an attempt to complete restructuring within the current framework before uncertainty grows."
Another retail industry official said, "Although the schedule was delayed somewhat by the FSS's correction request, this transaction is not just a simple governance cleanup but also tied to business reorganization, so it is not easy to change course midstream," adding, "It will likely head toward the final stage."
Seo Yong-gu, a professor in the School of Business at Sookmyung Women's University, said, "From a corporate standpoint, now is the right time to pursue business reorganization and governance cleanup," adding, "When regulatory changes are possible, the will to complete restructuring while the existing standards hold inevitably grows stronger." He added, "Under a duplicate listings structure, synergies between businesses can weaken in the long term, so this is the result of a judgment that streamlining it to improve managerial efficiency is advantageous."