SGC E-Tech Construction Minority Shareholders 'Angry'... Gather 3% Voting Rights to Initiate Shareholder Action

[Asia Economy Reporter Jang Hyowon] It has been confirmed that minority shareholders of SGC E-Tech Construction have gathered voting rights exceeding 3% and delivered them to the company. This is because, during last year's merger of Samkwang Glass, E-Tech Construction, and Gunjang Energy, E-Tech Construction promised to pursue a bonus issue and stock split in exchange for minority shareholders accepting an unfavorable merger ratio, but failed to fulfill this promise.

According to related industry sources on the 4th, the SGC E-Tech Construction 'Activist Shareholders Group' is known to have received delegated voting rights of 60,728 shares, about 3% of the total issued shares of 2,024,247 of SGC E-Tech Construction, and delivered them to the company. If the number of shares exceeds 3%, an extraordinary general meeting of shareholders can be convened.

The shareholders group's demands are for transparent disclosure of the decision-making of SGC E-Tech Construction's board of directors and for a bonus issue and stock split.

According to the shareholders group, SGC E-Tech Construction adjusted the merger ratio unfavorably for E-Tech Construction shareholders during last year's restructuring of the governance structure involving the split and merger of Samkwang Glass (SGC Energy), E-Tech Construction, and Gunjang Energy.

The original governance structure had Samkwang Glass at the top, with E-Tech Construction as a 30% subsidiary. Gunjang Energy was a subsidiary of E-Tech Construction. The governance structure was changed by splitting E-Tech Construction into a newly created investment corporation and merging Gunjang Energy into Samkwang Glass. Currently, Samkwang Glass (SGC Energy) is the holding company, with SGC E-Tech Construction and Gunjang Energy as subsidiaries.

The initial merger ratio between Samkwang Glass and E-Tech Construction was 1 to 3.2153032 shares, but it was eventually lowered to 1 to 2.5674087 shares.

In response, E-Tech Construction shareholders protested, and to appease their dissatisfaction, E-Tech Construction management reportedly promised cash and stock dividends, a bonus issue, and a stock split after the merger. However, SGC E-Tech Construction only implemented cash and stock dividends last year, citing practical difficulties.

A representative of the shareholders group pointed out, “SGC E-Tech Construction recorded sales of 292.2 billion KRW and operating profit of 11.9 billion KRW in the first quarter of this year, increases of 39.9% and 391.4% respectively compared to the same period last year. Nevertheless, the number of tradable shares is only 1 million, resulting in low trading volume and a sluggish stock price.”

They continued, “We request amendments to the board regulations to strengthen monitoring of major shareholders and executives through solidifying the composition and operation of the board of directors. We advocate for regular board meetings, strengthening the board’s authority and responsibilities, appointing directors with professional expertise, establishing and operating an audit committee, forming a transparent management committee, enhancing internal transaction controls, installing an audit office and revising audit regulations, and appointing additional outside directors.”

This content was produced with the assistance of AI translation services.