By Lee Hyo-sik
The National Pension Service (NPS), said Thursday that it opposes Dong-A Pharmaceutical’s plan to transform into a holding company, arguing it would only benefit the controlling family and undermine the interests of other shareholders.
Kwon Jong-ho, on the NPS decision-making committee, said Dong-A’s plan to set up a holding firm and place its cash cow energy drink business, Bacchus, under an unlisted company will compromise the interests of minority shareholders. NPS holds a 9.5 percent stake in the country’s largest drug maker.
``All committee members expressed concerns over Dong-A’s new corporate governance structure. We fear that the move would only make it easier for the chairman and his family members to control the drug maker, while dealing a blow to minority stakeholders,’’ Kwon said.
Under the plan, the drug producer wants to split itself into two business units; Dong-A ST producing prescription medicines and Dong-A Pharm making Bacchus and other over-the-counter products. A holding company named Dong-A Social Holdings will be set up owning a 100-percent stake in Dong-A Pharm.
Dong-A ST and Dong-A Social Holdings will be listed on the local bourse, but Dong-A Pharm will not.
``We think putting money-making Bacchus and other over-the-counter drugs under an unlisted firm controlled by the holding company would undermine shareholders’ clout and make the possible transfer of wealth to the chairman’s children easier,’’ Kwon said. Chairman Kang Shin-ho and his family hold a 14.64 percent stake in Dong-A.
He said all shareholders will benefit from robust Bacchus sales under the current structure. ``But if the popular energy drink is owned by unlisted Dong-A Pharm, the controlling family may reap all the profits. Additionally, the new structure could bring down stock prices.’’
However, Dong-A Pharmaceutical said the proposed holding company structure will easily be approved at its extraordinary shareholders’ meeting on Jan. 28.
``It is unfortunate that NPS opposes our plan to turn the firm into a holding company structure. But we are positive that the proposal will be approved by other shareholders,’’ Dong-A Pharmaceutical said.
GlaxoSmithKline and Korea Otsuka Pharmaceutical hold 9.91 percent and 7.92 percent stakes, respectively, while Dong-A labor union has 6.45 percent shares. Hanmi Pharm and Green Cross Corp. have 8.1 percent and 4.2 percent shares.
Earlier this month, executives at Dong-A Pharmaceutical were indicted on charges of giving kickbacks worth nearly 5 billion won to doctors at 1,400 hospitals in return for using their products.