Governance Forum: "Chairman Jeong Yong-jin Should Join as Inside Director to Receive Shareholder Evaluation"

Regarding the Purchase of Mother's Emart Shares
Accurate Acquisition Price is 510,000 Won Per Share
Urges Debt Repayment Through Sale of Non-Core Assets

The Korea Corporate Governance Forum urged Chung Yong-jin, Chairman of Shinsegae Group, on the 15th to "take office as an inside director and undergo shareholder evaluation in order to practice responsible management."

Yonhap News

In a statement released that day, the Governance Forum said, "Since Chairman Chung took office as the group chairman, Emart's stock price has fallen by 9%, and net borrowings have increased by 1 trillion won over nine months, exceeding 12 trillion won."

Earlier, on the 10th, Chung Yong-jin, Chairman of Shinsegae Group, announced that he would purchase a 10% stake in Emart held by his mother, Lee Myung-hee, the honorary chairwoman, for 214 billion won. The acquisition price was set at 76,800 won per share, which is 20% higher than the previous day's closing price of 64,000 won.

Shinsegae Group described this share purchase as "a measure to strengthen performance-based responsible management as the largest shareholder of Emart and to demonstrate a sense of responsibility and confidence in enhancing corporate value to the market." However, the forum pointed out that such transactions between controlling shareholders rather hinder governance.

The forum stated, "Companies with high debt cannot see stock price increases until financial debt repayments begin in earnest. The structure of 87% financial debt and 13% market capitalization (1.8 trillion won) of corporate value means the market is very concerned about Emart's financial condition and cash flow," adding, "A net debt to market cap ratio of 7 times is abnormal and unsustainable."

They also criticized the acquisition price. The forum pointed out, "The cash Chung Yong-jin spends in this transaction is 76,800 won per share (0.2 times PBR), but since he effectively assumes the debt as well, the accurate acquisition price based on corporate value is approximately 14 trillion won or 510,000 won per share."

The forum urged Chairman Chung that debt liquidation and governance improvement are the most urgent tasks. It said, "Emart's stock price has plummeted 46% over the past five years and 70% over ten years. This is due to Chairman Chung's reckless management, numerous M&A failures relying on borrowings, and lack of e-commerce response strategies against competitors like Coupang," adding, "This is a serious balance sheet problem that cannot be solved by workforce restructuring, CEO replacement, or cost reduction."

To resolve these issues, responsible management is necessary. First, he must obtain shareholder approval at the upcoming March general meeting and take office as an inside director. The board should also reexamine, from a fiduciary duty perspective, whether the payment of salaries and bonuses to Chairman Chung and his parents is appropriate based on management performance. Along with this, the forum demanded implementation of △ debt reduction through asset sales, △ reorganization of the board composition, and △ announcement of value-up plans and establishment of alignment through shareholder compensation.

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