"BYC 2nd Generation Acquires Shares Through Internal Transactions" Truston Begins Shareholder Activities

[Asia Economy Reporter Minji Lee] Truston Asset Management is set to take active shareholder actions regarding the listed company BYC.

On the 23rd, Truston Asset Management announced that it has changed the investment purpose of its 8.13% stake in BYC (8.06% of voting shares) from general investment to management participation. This publicly declares that it will actively engage in shareholder activities to enhance BYC's shareholder value.

With this disclosure change, Truston Asset Management will be able to undertake more proactive shareholder activities, including requesting inspection and copying of shareholder registers, board meeting minutes, and accounting books, demanding the convening of extraordinary general meetings, requesting the dismissal of directors, exercising shareholder proposal rights, as well as taking all necessary legal actions against management involved in illegal or unfair practices.

Truston Asset Management analyzed that BYC's corporate value is being suppressed due to △suspicions of private benefit appropriation through internal transactions among related parties △closed business operations centered on the major shareholder family △holding numerous non-performing real estate assets and undervaluation of these assets △damage to the company's image caused by violations of the Subcontracting Act.

In the statement released that day, it was noted, “As of the end of last year, BYC's consolidated total assets amount to 679.1 billion KRW, and it has generated operating profits of around 20 billion KRW annually over the past three years, yet its market capitalization is only 260 billion KRW. BYC has not conducted asset revaluation since 1983, and the value of its real estate holdings alone exceeds 1 trillion KRW at current market prices. However, chronic internal transactions among related parties and inefficient asset management are adversely affecting its performance.”

In fact, Jewon Enterprise, wholly owned by Han Ji-won, granddaughter of BYC founder Han Young-dae, generated annual sales of 4.2 billion KRW last year solely through managing and servicing BYC-owned real estate, which is more than 1.5 times the amount in 2019. Additionally, Shinhan Edifice, where Han Seung-woo, grandson of the late chairman Han, is the largest shareholder, conducts internal transactions by purchasing products from BYC and selling them to the second-generation owned company Shinhanbang, using the accumulated funds to acquire BYC shares. Shinhan Edifice's stake in BYC was only 5.5% at the end of 2018 but increased to 18.4% within three years, making it the largest shareholder.

According to the proxy advisory firm Sustainvest, the amount BYC purchased from unlisted affiliates last year accounted for more than 30% of its cost of goods sold, which is double the average of 15% for comparable companies. Furthermore, BYC's outside directors' attendance rate at board meetings was only 66% last year, significantly below the average of 89% for comparable companies.

Truston Asset Management emphasized the need for △a transparent board composition with effective monitoring and supervisory duties △establishment of a reasonable dividend policy △increasing liquidity through stock splits and bonus shares △and the formulation of an IR plan including shareholder-friendly policies to enhance company value.

Truston Asset Management stated, “We plan to formally request corporate value improvement measures by sending a shareholder letter soon,” and stressed, “In line with our investment philosophy of enhancing ESG value, we will make every effort necessary to improve corporate and shareholder value, including exercising shareholder rights permitted under relevant laws and taking all legal actions against management involved in illegal or unfair practices.”

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