It was confirmed that the Huons Global minority shareholders' alliance has consolidated 6.48% equity amid controversy over a potential merger between Huons Lab and Huons. As speculation grew that Huons Lab, an unlisted subsidiary of Huons Global, could be merged into the operating company Huons, Huons Global's share price plunged nearly 40% over the past five trading days. Minority shareholders, through the online shareholder activism platform Act, gathered more than 290 participants and 820,000 shares (6.48%) in equity, entering range to exercise shareholder rights such as requesting an extraordinary shareholders meeting and submitting shareholder proposals.
◇ Reviewing Huons Lab merger… Huons Global shares plunge about 40%
According to ChosunBiz reporting compiled on the 15th, as of this morning on the minority shareholder platform "Act," the Huons Global minority shareholders' alliance had consolidated a 6.48% equity stake. The consolidated share count is 820,476 shares with 290 participating shareholders. The consolidated amount calculated by Act is 33.35 billion won.
Huons Global is a company with strong control by the owner family. As of the end of last year, Chairman Yoon Sung-tae of Huons Group is the largest shareholder, holding 42.76% equity in Huons Global. Adding the eldest son, Executive Vice President Yoon In-sang at 4.62%, Kim Kyung-ah at 3.39%, Yoon Yeon-sang at 3.01%, and Yoon Hee-sang in the 2.7% range, the owner family's equity is in the mid-56% range. With only the minority shareholders' alliance equity, it is not an easy structure to threaten management control in an immediate vote showdown.
However, the minority shareholders' consolidation is meaningful in that it emerged as the Huons Lab merger controversy led to a share-price decline. Huons Global and Huons recently said in responses to a Korea Exchange (KRX) inquiry disclosure that they are reviewing strategic options such as a merger of affiliates. The two companies said they would re-disclose within one month or when specifics are decided.
The market is focusing on the possibility that Huons Lab, an unlisted subsidiary of Huons Global, could merge with Huons. Huons Lab is developing an SC conversion platform technology that changes intravenous drug formulations into subcutaneous injections. Huons Global is the largest shareholder with 64.1% equity in Huons Lab. However, this is based on a figure that excludes voting convertible redeemable preferred shares.
Depending on the merger structure, concerns have been raised that the future value of Huons Lab enjoyed by Huons Global shareholders could shift to Huons shareholders, sending the two companies' share prices in opposite directions. Huons Global shares fell nearly 40%, sliding from 64,800 won at the close on the 8th to the 39,000-won range intraday today. In contrast, Huons shares rose from 30,250 won to the high 30,000-won range over the same period, logging a gain of around 20%.
◇ Minority shareholders gather 6.48%… Enter range for extraordinary meeting and shareholder proposals
As the minority shareholders' alliance pooled equity in the 6% range, the likelihood of exercising shareholder rights also increased. Under the Commercial Act, shareholders holding at least 3% of the total number of issued shares may request the board to convene an extraordinary shareholders meeting. Shareholders holding at least 3% of the total number of issued shares, excluding nonvoting shares, may also exercise the right to make shareholder proposals to place items on the meeting agenda.
However, the consolidation rate on Act does not immediately translate into legally co-held equity or delegated voting rights. To actually request an extraordinary meeting or submit shareholder proposals, requirements such as verification of holdings on the shareholder register, proxy relationships for voting rights, and holding period must be met. If the stake exceeds 5%, the obligation to file a large-shareholding report under the Financial Investment Services and Capital Markets Act may also become an issue, depending on whether the consolidated shareholders are deemed to be in a co-holding relationship. Financial authorities require reporting of holding status and purpose of holding when the combined holding ratio of the person and related parties is 5% or more.
The consolidation of minority shareholders could go beyond a simple expression of dissatisfaction with the share price and align with the government's push to restore trust in capital markets and protect shareholders. President Lee Jae-myung has emphasized cracking down on unfair trading such as stock manipulation and curbing controlling shareholders' abuse of management rights since taking office. In issues like the Huons Lab merger controversy, where concerns over governance and shareholder value erosion overlap, the moment minority shareholders pool a certain equity stake, the matter is likely to spread beyond the market.
◇ If it tops 10%, right to seek company dissolution… For listed firms, a pressure card
If the minority shareholders' alliance raises its equity to 10%, the pressure on the company increases further. Under the Commercial Act, shareholders holding at least 10% of the total number of issued shares may petition the court to dissolve the company if its business has been deadlocked for a long time or if the management or disposition of company property is significantly improper and threatens the company's existence.
However, a petition to dissolve a company is closer to a pressure tactic than an actual prospect of dissolution. The court strictly examines whether there is any way to protect shareholder interests other than dissolving the company. In practice, cases where a dissolution petition has been granted have mostly involved closely held companies where trust among shareholders has broken down, or special-purpose companies set up for specific projects, rather than minority shareholder campaigns at listed firms.
In 2015, the Supreme Court affirmed a lower court's decision recognizing dissolution in a case where the core asset of a joint-venture corporation had been disposed of by public auction, making it difficult to carry out its stated purpose. Among listed companies, matters more often lead to extraordinary meetings, shareholder proposals, demands to appoint or dismiss directors and auditors, or opposition to mergers, rather than dissolution petitions.
An industry official said, "If the Huons Global minority shareholders' alliance further raises its consolidation rate, pressure will likely intensify over the Huons Lab merger structure and whether it harms shareholder value."