Doosan’s chicken-frying robot used in a high school cafeteria (Courtesy of Doosan Robotics)
South Korean regulators have ordered Doosan Robotics to amend a securities prospectus it filed last week for its merger with Doosan Bobcat after it drew sharp criticism from Bobcat’s minority shareholders and politicians.
The Financial Supervisory Service (FSS) reviewed the prospectus and determined that the document was not submitted in a proper form, contained false statements or explanations on important matters or did not clearly explain important matters, Doosan Robotics said in a regulatory filing on Wednesday.
As such, the initial merger documents may hinder investors from making rational investment decisions or cause significant misunderstandings, Doosan quoted FSS as saying.
Collaborative robot maker Robotics is required to file an amended prospectus within the next three months.
Doosan Group said on Sunday it would complete its merger with Bobcat by early next year, a move aimed at encouraging Bobcat to play an active role in expanding parent Doosan Group’s business through M&A.
Doosan Bobcat All-Electric Skid Steer Loader
The announcement drew strong backlash from investors, who called for capital market laws to be amended to ensure proper valuation of the merging companies.
Shareholder activists and opposition lawmakers argued that the 1:1 merger ratio between Robotics and Bobcat had either dramatically increased the value of loss-making Robotics or caused the value of Bobcat, the group’s cash cow, to plummet.
Opposed to the Value Up Program
Their combination is also seen as running counter to the so-called corporate valuation enhancement program launched and supported by the Financial Supervisory Service to address the “Korea discount,” a trend in which Korean companies tend to be undervalued compared to their intrinsic value.
Bobcat shares have been falling for five consecutive trading days. On Friday, the construction machinery maker’s shares fell 3.7 percent to close at 42,500 won ($18), their lowest price in eight months.
Robotics shares fell to their lowest price in more than five months, closing down 0.95% at 72,700 won.
Doosan Energy, a power plant engineering company, fell 0.32 percent to close at 18,870 won, its lowest in two months.
To combine Robotics and Bobcat, Robotics will acquire Enablility’s 46% stake in Bobcat and the rest from the stock market, meaning Enablility’s minority shareholders will lose 271,000 won ($195) per 100 shares, argued Kim Hyun-jun, a Democratic Party lawmaker.
Doosan Corporation, the holding company, is Enability’s largest shareholder with a 30.39% stake.
Doosan Enablility’s hydrogen gas turbine model on display at CES 2024
The Korea Corporate Governance Forum (KCGF), a shareholder activist group, argued at a seminar this week that no other country would legally recognise a one-for-one merger between two companies in which one company’s revenue would increase by about 180 times.
The company has asked regulators to scrutinize the Robotics-Bobcat merger before approving it.
Bobcat earned 239.5 billion won in operating profits on sales of 2.2 trillion won in the second quarter of this year.
The robotics division’s quarterly loss widened to 7.9 billion won from a loss of 5.4 billion won a year ago. Sales for the same period were 14.4 billion won.
Within the limits of the law
Despite strong criticism of the merger of Doosan Group’s two divisions, some analysts have questioned whether Doosan will change its proposed one-to-one merger ratio, saying it is within South Korean law.
Please email Min Kyung Shin at radio@hankyung.com.
This article was edited by Yeonhee Kim.
