By Yoon Ja-young
The National Pension Service (NPS) is planning to request Mirae Asset Daewoo to purchase its stake in the securities firm if its stock prices fall ahead of its merger with Mirae Asset Securities. According to Mirae Asset, however, it won’t affect the merger as it has enough cash reserves to purchase the stocks.
The NPS is examining whether the merger between Mirae Asset Securities and Mirae Asset Daewoo will help increase corporate value, according to industry sources. The pension fund, which holds a 6.68 percent stake in Mirae Asset Daewoo as of March, is its second largest shareholder.
Mirae Asset was selected as the preferred bidder to acquire KDB Daewoo Securities last December. It changed the name of the new brokerage arm to Mirae Asset Daewoo. Now, it plans a merger of the two brokerage arms, Mirae Asset Securities and Mirae Asset Daewoo. The merger will give birth to the nation’s largest securities firm, with 6.7 trillion won in capital.
However, the NPS is making clear that it won’t sit idle and become a rubber stamp. If it determines that the merger damages the corporate value of Mirae Asset Daewoo, it would be voting against the deal at a shareholders’ meeting scheduled for Oct. 20.
Even if it determines that the merger will improve corporate value, the pension fund said it may request Mirae Asset Daewoo to purchase its stake if the share price falls below 8,000 won.
When a company decides on a merger or other critical issues that affect the interests of shareholders, they can request the company to purchase their stake at a certain price. Mirae Asset Daewoo and Mirae Asset Securities set the claims for stock purchase price at 7,999 won when they signed the merger in May.
Hence, if the stock price falls below this, it would be better for shareholders, including the NPS, to request the company to purchase their stocks.
The price of Mirae Asset Daewoo’s shares, which hovered above 10,250 won before the acquisition decision by Mirae Asset Securities, continued falling since then, trading at 7,520 won, June 27. It is now trading at around 8,800 won thanks to a recent rally of securities companies but the price may fall below 8,000 won again. The shareholders who oppose the merger should notify the company by Oct. 19 and they can exercise their claims for stock purchase between Oct. 20 and 31.
Back in 2014, Samsung Heavy Industries and Samsung Engineering scrapped a merger as shareholders including the NPS requested that the companies buy back their shares as they opposed the plan.
If the NPS requests the buyback of its stake, Mirae Asset Daewoo will have to acquire its 21.8 million shares for 174.5 billion won. If other shareholders join the NPS and request a buyback of shares, Mirae Asset may need hundreds of billions of won as they hold a 52.99 percent stake.
However, a spokesperson for Mirae Asset said it can go ahead with the deal even in the worst case scenario.
“We have enough cash reserves to purchase the shares. We are planning IR activities for the NPS and other institutional investors,” he added.
He said that the new Mirae Asset Daewoo Securities, set up by merger, will be launched in November as scheduled.