Doosan Group's 'Bobcat-Robotics' Merger Again Under Scrutiny in National Assembly

Doosan Group CI. Photo by Doosan

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The merger plan between Doosan Bobcat, Doosan Group's 'stable cash cow,' and the loss-making company Doosan Robotics has come under scrutiny not only in the market but also in the National Assembly's Political Affairs Committee.

On the morning of the 25th, Kim Hyun-jung, a member of the Democratic Party of Korea, stated at the National Assembly's Political Affairs Committee, "The merger proceeded in a way that harms minority shareholders for the benefit of the major shareholder," adding, "This directly contradicts the government's capital market value-up policy."

Earlier, Doosan Group announced a business restructuring plan to transfer Doosan Bobcat to become a wholly-owned subsidiary of Doosan Robotics through a spin-off and merger between Doosan Robotics and Doosan Enerbility, as well as a comprehensive stock exchange between Doosan Bobcat and Doosan Robotics. However, controversy arose in the market over the merger ratio. Doosan Robotics shares are allocated at 0.63 shares per 1 share of Doosan Bobcat, leading to claims that Doosan Bobcat's corporate value was undervalued.

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Kim Hyun-jung's office estimated that minority shareholders holding 100 shares of Doosan Enerbility before the merger would receive 75.3 new shares of Doosan Enerbility's business corporation and new shares of Doosan Robotics after the merger. In this case, existing minority shareholders of Doosan Enerbility could suffer a loss of 271,000 KRW per 100 shares.

Lee Bok-hyun, Governor of the Financial Supervisory Service (FSS), when asked about the need to amend the Commercial Act, including directors' duty of loyalty, citing the Doosan Group case, responded, "I think it is a time to consider principles rather than regulate individual acts."

Kim also asked Governor Lee, "Do you remember when you investigated and prosecuted the merger between Cheil Industries and Samsung C&T?" and pointed out, "We should take seriously that such cases are currently underway."

She added, "I believe the FSS's decision to reject the securities registration statement submitted by Doosan yesterday was a very well-made move by our financial authorities."

The Financial Supervisory Service recently announced that it requested a correction of the securities registration statement for the comprehensive stock exchange and transfer related to the controversial Doosan Robotics merger. The FSS explained that the correction was requested to ensure shareholders are provided with sufficient information, including the background of the restructuring, decisions regarding shareholder value, and potential risks to profitability and financial stability.

Kim urged the FSS to "continue timely monitoring of these matters."

Meanwhile, on the 18th, Kim Hyun-jung introduced a bill to amend the "Capital Market and Financial Investment Business Act" to strengthen the responsibility for fair merger price calculation and tighten regulations on mergers between affiliates.

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