Doosan scraps controversial merger plan

Doosan's headquarters in Seongnam, Gyeonggi Province / Courtesy of Doosan

Doosan decided to withdraw its controversial plan to delist Doosan Bobcat and merge the profitable construction equipment maker with the struggling robotics firm, Doosan Robotics.

On Thursday, Doosan Bobcat and Doosan Robotics held their respective board meetings to cancel their comprehensive stock swap deal signed last month as part of the group’s corporate governance restructuring plan.

“We continue to believe that the proposal would support sustainable long-term growth and
represent a valuable opportunity to align both shareholder interest and the company’s
objectives.
However, following the announcement of the proposal, some of our valued stakeholders
shared critical views and diverse opinions. We believe that no restructuring of the business
or corporate governance can be accomplished without full trust and support of our
shareholders,” Doosan Bobcat CEO Scott Park said in a letter to shareholders.

“The company will continue to seek ways to create synergies with Doosan
Robotics, including reviewing the business restructuring based on the communication with
the market and regulatory changes.
We regret the confusion this has caused.”

Doosan Robotics CEO Ryu Jung-hoon also sent a letter apologizing to shareholders.

Before the latest decision, Doosan faced severe backlash from investors and policymakers over its plan to exchange each Doosan Bobcat share for 0.63 Doosan Robotics stock, effectively assigning greater value to the shares of the struggling robotics firm.

Although the conglomerate explained that it complied with the Capital Markets Act in setting the ratio, multiple lawmakers proposed a bill known as the anti-Doosan Bobcat law, as the merger plan was considered to benefit its controlling stakeholders only and undermine the government's efforts to stimulate the domestic capital market.

Sean Brown, director of global investments at Texas-based Teton Capital Partners, even described the plan as “robbery,” saying that he sold most of his shares in Doosan’s affiliates after the Korean conglomerate announced its planned restructuring.

Financial Supervisory Service Gov. Lee Bok-hyun also denounced the merger plan, repeatedly asking Doosan to correct its prospectus on the plan.

Following the recent decision, Doosan Bobcat will continue to be listed on the KOSPI.

However, Doosan remains at odds with retail investors, as the conglomerate plans to proceed with spinning off Doosan Bobcat from Doosan Enerbility, a plant facilities unit, and making the construction equipment maker a subsidiary of Doosan Robotics.

In that case, Doosan Robotics will hold a 46.1 percent stake in Doosan Bobcat.

“Nothing has changed for Doosan Enerbility’s minority shareholders, because the company will lose Doosan Bobcat to Doosan Robotics,” a group of minority shareholders said in a statement.

Doosan Enerbility explained that governance restructuring is essential to reduce its debt by 700 billion won ($525 million) and to expand its production capacity in response to the recent boom in the nuclear energy industry.

"Following the request from the financial authorities, both Doosan Enerbility and Doosan Robotics will amend their prospectuses," a Doosan official said.

"After considering feedback from the market, we will rearrange the schedule for the restructuring plan."