As Huons Group decided to merge its subsidiary Huons Lab, under holding company Huons Global, into Huons, a coalition of Huons Global minority shareholders and investor alliance submitted a petition to financial authorities asking them to investigate the group's merger process. The shareholders' alliance is even moving to hire an attorney, raising the likelihood that the conflict between the company and shareholders will expand into legal disputes.
According to the Huons Global minority shareholders' alliance and investor alliance on the 21st, they submitted a petition the previous day to the Financial Supervisory Service, the Financial Services Commission, the National Assembly and others titled "Call for a stern investigation into a backdoor affiliate merger allegedly bypassing the amended Commercial Act and accompanied by suspected leakage of undisclosed information."
In the petition, they said, "This merger is a typical expedient structure that exploits a regulatory blind spot to transfer the wealth of ordinary shareholders of the parent company to the controlling family and a specific financial investor (FI)," and added, "There are allegations that internal information was leaked before the official disclosure to artificially swing the share prices of both companies and distort the merger ratio."
In particular, the minority shareholders took issue with the fact that after rumors related to the merger spread on the 11th–12th, Huons Global's share price plunged while the share price of Huons, the merger party, surged.
They argued, "Due to the rise in Huons' share price, Huons was overvalued when calculating the merger price, and as a result, Huons Global, which owns Huons Lab, suffered a disadvantage by being allocated a lower equity ratio of the new shares issued in the merger."
They went on to say, "Given the potential for the use of undisclosed material information and price manipulation, a strong investigation by the special judicial police and the Korea Exchange (KRX) is needed."
They also raised issues of procedural legitimacy. Citing Ministry of Justice guidelines, the minority shareholders' alliance pointed out, "Each party to the merger needs an independent special committee, but there is no related record of establishment or operation at Huons Lab."
They also questioned the valuation method for Huons Lab. They argued, "While valuing a loss-making research entity in a capital impairment state at 129 billion won, they reflected projected future revenue through 2041, and the external assessment period was only about two weeks," claiming it was a "sloppy, rushed assessment tailored to the value desired by the controlling shareholder."
Earlier, on the 18th, Huons held a board meeting and approved an agenda item to merge unlisted affiliate Huons Lab into Huons. The merger ratio is 1 to 0.4256893, and the merger date is Aug. 18. The scheduled listing date for the new shares is Sept. 4. Huons plans to hold an extraordinary shareholders' meeting on July 16 to approve the merger resolution.
Among shareholders, dissatisfaction is growing that the merger structure itself is unfavorable to Huons Global shareholders. Huons Lab is currently an unlisted subsidiary of Huons Global, and if it is merged into affiliate Huons, a significant portion of Huons Lab's future growth value could be transferred to Huons shareholders.
The market sees a possibility that corporate value could jump significantly if technology licensing of the hyaluronidase-based subcutaneous injection (SC) platform owned by Huons Lab is realized. In that case, the potential value of Huons Lab currently held by Huons Global would be diluted, and there are concerns that a substantial portion of the increased excess value would accrue to shareholders of Huons, the merged entity.
The company's position is that the merger is a decision to secure future growth drivers by combining Huons' financial resources and business capabilities in the process of promoting the technology licensing of Huons Lab's hyaluronidase-based SC formulation change technology.
It also determined that the merger price is appropriate because the merger ratio falls within the evaluation range calculated by external evaluator Ichon Accounting Corporation. Huons also decided to grant appraisal rights to shareholders who oppose the merger.
However, the shareholders' alliance argued, "Judging from recent cases in which financial authorities strongly demanded corrections, the fairness of a merger is not ultimately secured by an external valuation opinion alone."
According to cases presented by the shareholders' alliance, NP and WYSIWYG Studio submitted securities registration statements with external evaluators' opinions attached, but were asked to correct them due to reasons such as failure to establish special committees, lack of independence in appointing outside experts, and insufficient information provided to minority shareholders.
In the Hyundai G.F Holdings–Hyundai Home Shopping transaction, there was a correction request to "state more clearly whether directors fulfilled their duty of loyalty," and in the case of the comprehensive share exchange between E-MART and Shinsegae Food, the FSS reportedly proceeded with repeated correction requests to protect minority shareholders, according to the shareholders' alliance.
The shareholders' alliance also strongly protested that before communicating with shareholders, Huons held an investor relations (IR) session for institutional investors and others, saying the company "passed over" shareholders.
At an IR meeting the previous day, Huons Group explained the progress of Huons Lab's technology transfer and the future direction of governance restructuring. Some shareholders pointed out that "explanations to capital market participants were prioritized over communication with ordinary shareholders."
Financial authorities are also closely watching the controversy surrounding this merger. The FSS said that once the company's merger registration statement is submitted, it will comprehensively review whether there are any legal violations and whether shareholder protection procedures have been followed.
Meanwhile, the shareholders' alliance is considering selecting a shareholder representative and hiring an attorney. As of 10 a.m. that day, it had secured 11.78% equity through the online shareholder action platform "ACT." The number of shares rallied is 1,491,931, and the number of participating shareholders is 432. The rallied amount calculated by ACT is 48.49 billion won.