Cha Partners Signals Proxy Battle at Samyoung Electronics Industry Shareholders' Meeting with Shareholder Proposal

"Stock Price Lower Than a Decade Ago... Excessive Undervaluation"

Proposal to Appoint Auditor and Acquire Treasury Shares Worth 30 Billion Won

Cha Partners Asset Management has issued a shareholder proposal to Samyoung Electronics Industry, demanding the appointment of an auditor and the acquisition of treasury shares, signaling a proxy battle at the upcoming regular general shareholders' meeting.

On March 17, Cha Partners began actively soliciting proxy voting rights ahead of the Samyoung Electronics Industry regular shareholders' meeting scheduled for March 27. The firm also proposed agenda items for the meeting to enhance shareholder value. Cha Partners recommended Son Woochang as a candidate for auditor and demanded the acquisition of treasury shares worth 30 billion won using the company's net cash holdings.

Cha Partners stated that it made this shareholder proposal to resolve the severe undervaluation of Samyoung Electronics Industry. As of March 11, the company’s stock price stood at 12,200 won, which is even lower than the 12,750 won recorded on December 30, 2015, more than a decade ago. During the same period, the KOSPI index rose 180%, and the stock price of competitor Samwha Electric increased by approximately eightfold.

Discrepancy Between Samyoung Electronics Industry’s Book Value Per Share and Stock Price. Cha Partners Asset Management

Samyoung Electronics Industry’s return on equity (ROE) stands at just 1–3%, and its price-to-book ratio (PBR) is merely 0.4 times. Even this figure is considered overstated; when accounting for the market value of its real estate holdings, the actual PBR is estimated to be between 0.2 and 0.3 times.

Cha Partners identified the company’s underperforming board of directors as the cause of Samyoung Electronics Industry’s undervaluation. CEO and Chairman Byun Dongjun has served for about 37 years, while key internal directors have been in their positions for 8 to 17 years. External directors, who should oversee the board, have also been selected from foundations related to the chairman, indicating that the board has been operating in a complacent manner.

The largest shareholder of Samyoung Electronics Industry is Nippon Chemi-Con (NCC), a Japanese listed company, but actual control is exercised by Chairman Byun and his affiliates. Although there is only one NCC-affiliated member on the board, major decisions still require consultation with NCC, making it difficult to ensure responsible decision-making.

Cha Partners also raised concerns regarding conflict-of-interest transactions and potentially breach-of-duty financial support related to the company’s major shareholders. At the end of 2023, as NCC’s financial structure deteriorated due to fines and settlement payments related to collusion, NCC conducted a capital increase in which both the Japanese financial institution consortium (JIS) and Samyoung Electronics Industry participated. However, while JIS invested in redeemable convertible preferred shares (RCPS) with annual dividends of 5.5–7.5% and included conversion and redemption rights, Samyoung Electronics Industry acquired common shares, which, due to cross-shareholding, have no voting rights and do not guarantee dividends or fixed returns. The company also accepted limitations on additional acquisition and disposal.

Cha Partners pointed out that this transaction, which passed unanimously in the Samyoung Electronics Industry board, risks constituting a breach of duty in favor of the major shareholder rather than benefiting the company. As a result, Cha Partners recommended Son Woochang, a legal expert with over 20 years of experience as a prosecutor and attorney, as auditor. Cha Partners stated, "Son Woochang is the right person to normalize the company's governance by monitoring and keeping the board of directors in check from an independent position, separate from the current management and major shareholders."

In addition, Cha Partners proposed the acquisition of 30 billion won worth of treasury shares to improve inefficient capital allocation. The firm plans to pursue more active shareholder engagement starting with this regular shareholders' meeting.

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