Huons Global decided to postpone the date of an extraordinary shareholders meeting that will determine whether to merge its subsidiaries Huons Lab and Huons. The company said the move aims to protect the rights of minority shareholders and ensure procedural legitimacy by reflecting the duplicate listing guidelines being prepared by financial authorities. The market, however, also sees differences between the company and a minority shareholders' coalition over how to apply the so-called "3% rule," which limits the voting rights of the largest shareholder, as a factor behind the delay.
According to a filing on the 22nd, Huons Global decided to postpone the opening date of the extraordinary shareholders meeting on the agenda to merge Huons Lab into Huons until after the duplicate listing guidelines are announced.
Originally, the company planned to hold an extraordinary shareholders meeting on the 3rd of next month to vote for or against the merger plan. It said the schedule was adjusted because the announcement of subsidiary duplicate listing guidelines being prepared by financial authorities and the Korea Exchange (KRX) has been delayed.
Huons Global said it has been reviewing a plan to limit the voting rights of the largest shareholder and related parties, even though it is not legally required, to reflect the views of general shareholders in the merger process without distortion. However, it said that if the company arbitrarily sets detailed standards before the guidelines are finalized, it could spark another fairness controversy.
The market, however, points to conflict over how to apply the "3% rule" as the backdrop for the delay.
Earlier, the Huons group pursued a plan to merge unlisted Huons Lab with listed Huons. Huons Lab is a research and development corporations that owns the "HyDIFFUZE" platform technology, which converts intravenous (IV) formulation drugs into subcutaneous (SC) formulations. The group plans to transfer this platform technology to Huons to begin commercialization in earnest.
However, a Huons Global minority shareholders' coalition has strongly opposed the plan, saying Huons Lab's value is not fully reflected and that the deal is effectively a backdoor listing transaction. In particular, it takes issue with the effect that, if Huons Lab is incorporated as a Huons subsidiary, the value of core asset held by Huons Global would transfer to Huons.
In response, Huons Global accepted recommendations from a special committee that included external experts and set up a process to hold an extraordinary shareholders meeting to confirm the will of general shareholders. In doing so, it sought to appease minority shareholders by saying it would apply the "3% rule," which limits the voting rights of the largest shareholder side to minimize the influence of the controlling shareholder.
The key is how to apply the 3% rule in detail. The outcome of the vote could vary widely depending on whether the largest shareholder side's voting rights are limited to 3% or recognized up to about 15% when facing the opposing equity consolidated by minority shareholders.
The combined equity ratio of Huons Global's largest shareholder and related parties is 57.14%. Chair Yoon Sung-tae holds 42.76%, followed by eldest son Director Yoon In-sang (4.62%), spouse Kim Kyung-ah (3.39%), second son Yoon Yeon-sang (3.01%), and third son Yoon Hee-sang (2.72%).
The minority shareholders' coalition is demanding application of a "combined 3% rule," which groups the largest shareholder and related parties as a single bloc and recognizes their total voting rights only up to 3%. In this case, the largest shareholder side's voting rights would drop from 57.14% to 3%.
By contrast, if an "individual 3% rule," which calculates the largest shareholder and related parties separately, is applied, the situation changes. Shareholders with an equity ratio exceeding 3% can exercise voting rights only up to 3%, while those holding less than 3% can exercise all of their voting rights, so the largest shareholder side's voting rights would be recognized up to about 15.36%.
Even with the same 3% rule, the extent to which the will of general shareholders is reflected in the vote varies greatly depending on which method is applied. Huons Global also has yet to finalize the specific method for limiting voting rights. The company said it will decide the final plan by following the duplicate listing guidelines once they are announced by financial authorities.
Financial authorities and the Korea Exchange (KRX) are currently preparing detailed guidelines to protect the rights and interests of general shareholders in the duplicate listing process. The guidelines are expected to include procedures for parent company shareholder consent and measures to limit the controlling shareholder's voting rights, but the timing of the announcement is being pushed back from initial expectations as interagency consultations drag on.
Huons Global plans to announce a new schedule and details for the extraordinary shareholders meeting after reviewing the method for limiting voting rights and other matters once the guidelines are released.
Huons Global CEO Song Su-young said, "This postponement of the extraordinary shareholders meeting is a decision to uphold the principle of shareholder-centered management," adding, "We will actively accept the guidelines to be announced and decide whether to merge according to shareholders' opinions."