As shareholder backlash spread over the merger of Huons Lab, Huons Group decided to set up a venue to communicate directly with shareholders and to form a special committee to review the appropriateness of the merger. The move came after the Huons Global shareholder alliance, the parent of Huons Lab, submitted a petition to financial authorities and moved to appoint legal counsel, in what appears to be an effort to appease shareholders.
Huons Global said on the 22nd that it will hold a shareholder meeting to explain the background and appropriateness of the merger between Huons and Huons Lab, as well as the impact on shareholders. Beyond Huons and Huons Lab, which are parties to the merger, the parent company will conduct a separate review and share the results with shareholders.
The move is seen as a response to growing backlash from the Huons Global minority shareholder alliance and investor alliance. On the 20th, the shareholder alliance submitted a petition to the Financial Supervisory Service, the Financial Services Commission, and the National Assembly calling for a strict investigation into an "illegal intra-affiliate merger accompanied by alleged circumvention of the amended Commercial Act and leakage of undisclosed information." They are also said to be moving to appoint legal counsel.
Earlier, on the 18th, Huons held a board meeting and approved a proposal to absorb and merge the unlisted affiliate Huons Lab. 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 vote on the merger approval.
Huons Lab, a subsidiary of Huons Global, is a core research and development (R&D) company with a hyaluronidase-based subcutaneous injection (SC) platform technology. The industry says talks on technology out-licensing with global drugmakers are underway.
In the market, there is concern that if Huons Lab's technology out-licensing materializes, the potential value of Huons Lab currently held by Huons Global could be diluted after the merger. Observers note that a significant portion of any post-merger rise in corporate value could accrue to shareholders of Huons, the surviving entity.
In the petition, the shareholder alliance argues the merger is "a structure that transfers the wealth of the parent company's ordinary shareholders to the controlling shareholder family and certain financial investors (FI)." They say that prior to the official disclosure, the leak of internal information distorted the share prices of both companies, resulting in Huons being valued higher and creating a disadvantageous structure for Huons Global shareholders who hold equity in Huons Lab.
In particular, shareholders are also pushing back against Huons for holding an investor relations (IR) session for institutional investors before communicating with ordinary shareholders. At the IR meeting the previous day, Huons explained the status of Huons Lab's technology transfer and the future direction of governance restructuring, but some shareholders said, "Briefings for capital market participants were prioritized while ordinary shareholders were excluded."
Questions were also raised about procedural legitimacy. Citing Ministry of Justice guidelines, the shareholder alliance argued, "Each merging company needs an independent special committee, but there are no records of establishment or operation at Huons Lab."
In response, Huons Global decided to form a special committee under the board of directors. It plans to explain the method used to calculate the merger ratio, the basis for selecting peer corporations, and whether technology value was reflected, at the shareholder meeting.
Huons Group says the merger with Huons, which has a stable cash-generating capacity, is inevitable because Huons Lab is in a capital impairment state and faces constraints in raising additional funds. It also explained that while Huons Global, a pure holding company, has limited capabilities in production, development, regulatory response, and cash resources, Huons has the necessary infrastructure and human resources, making it suitable for pushing ahead with research and development.
A Huons Global official said, "We are fully aware of the duty of loyalty to all shareholders under the amended Commercial Act and are closely examining the impact on all shareholders, including minority shareholders," adding, "We will disclose details and communicate through the shareholder meeting."