Nam Hyun-woo has worked as a staff writer at The Korea Times since 2013, mostly covering business and politics. He currently belongs to the Business Desk where he covers topics such as emerging tech, AI, ICT and Korea's chaebol community. Prior to joining the team, he was the paper's correspondent for the presidential office of Korea during the Yoon Suk Yeol and Moon Jae-in administrations.
Faltering share prices threaten Doosan's Bobcat-Robotics merger
Doosan Bobcat's S7X loader, left, and Doosan Robotics' Oscar The Sorter robot / Courtesy of Doosan Group
By Nam Hyun-woo
Faltering share prices of Doosan's subsidiaries are jeopardizing the conglomerate's efforts to merge its key units. The decline in values is leading more shareholders to exercise their rights to demand that the company repurchase shares at prices higher than the current market value.
Doosan Group is seeking to merge its lucrative construction equipment unit, Doosan Bobcat, with its money-losing robotics affiliate, Doosan Robotics.
For the merger, the group has set a ratio of exchanging 100 Bobcat shares with 63 Robotics shares, thereby assigning a higher value to Robotics shares. The companies are now working to persuade shareholders to approve the merger.
Opponents of the merger can exercise their appraisal rights, which allow minority shareholders to dissent from a company's M&A decision and demand that the company purchase their shares at a price reflecting fair value. Korea guarantees these rights to shareholders of listed companies as well.
Bobcat's appraisal rights price is set at 50,459 won, significantly higher than the company's closing price of 39,150 won on Monday. This means investors could realize a margin of nearly 10,000 won or 25 percent per share if they exercise their appraisal rights. Although Bobcat was trading at 51,400 won on July 1, its price has declined by 23.8 percent within just a few weeks.
Bobcat has set a limit of 1.5 trillion won ($1.01 billion) for repurchasing shares from shareholders. This amount would cover up to 30 percent of the company's total shares. Individual investors currently hold 45.32 percent of Bobcat's stake.
According to a report from Hong Kong-based financial firm CLSA, Doosan Corp., the parent company of Bobcat, recently held an investor event and noted that the likelihood of the value of appraisal rights exercised by shareholders exceeding the company's 1.5 trillion won budget is slim.
Even if the amount surpasses the budget, the company stated it "will find ways to overcome" the situation, indicating that the merger will proceed despite the potential for increased costs.
The situation is similar for Doosan Robotics. The appraisal rights price for Robotics is 80,472 won, which is significantly higher than its market price of 67,300 won on Monday.
Robotics' budget to cover appraisal rights is set at 500 billion won, which means the limit will be reached if 9.6 percent of shareholders request a repurchase.
"A wider gap between appraisal rights prices and market prices will prompt more investors to oppose the merger plan and gain profits," an official at a conglomerate said.
"To prevent merger costs from snowballing, stabilizing share prices is an important task for Doosan Group. But it will not be easy. Market perceptions on the merger plan are already negative, particularly about giving a higher value to Robotics."