Huons Group's proposed merger of Huons and Huons Lab has become mired in controversy due to opposition from minority shareholders and increasing regulatory scrutiny from financial authorities regarding dual listings. The company cites the need to enhance research and development capabilities as the rationale for the merger, but Huons Global's common shareholders are raising concerns about the structural issue of core unlisted assets being transferred to a listed entity.
According to industry sources, Huons' board of directors resolved in May to absorb its unlisted subsidiary Huons Lab, announcing plans to strengthen R&D and expand its competitiveness in the bio sector. However, minority shareholders of Huons Global have opposed the merger, arguing that it represents a transfer of key growth assets to a listed company and an attempt to avoid dual listing regulations. They have demanded reviews and investigations from the Financial Supervisory Service and the stock exchange, leading to ongoing disputes.
The situation has become more complicated in light of the financial authorities' recent announcement to strengthen regulations on dual listings. On July 6, the Financial Services Commission and the Korea Exchange released detailed criteria prohibiting dual listings and allowing exceptions, stating that asymmetrical dual listings that do not consider the rights of common shareholders will be strictly prohibited.
Under these new guidelines, boards of directors of parent companies pursuing dual listings are required to fulfill five obligations: assessing shareholder impact, establishing shareholder protection measures, confirming shareholder communication or consent, voting on the board's approval or disapproval, and notifying subsidiaries, along with phased disclosures. Additionally, an independent special committee must be established to conduct prior reviews and decisions, and the so-called '3% rule' for shareholder consent will be mandatory for listings of material division subsidiaries.
Analysts predict that the merger between Huons and Huons Lab will inevitably be affected by these developments. The key factor determining the merger's outcome will likely be the level of shareholder protection measures the company presents during the review process.
Indeed, Huons Global had initially planned to hold a temporary shareholders' meeting to gather opinions on the merger with Huons Lab but postponed it last month. The company announced that it decided to delay the meeting following the release of the dual listing guidelines. Industry insiders believe that the application of the '3% rule' and the procedures for protecting common shareholders contributed to the schedule adjustment.
Distrust among minority shareholders remains high. Some investors have already raised questions about the company's intentions, citing stock price fluctuations since the merger announcement.
Industry experts believe the success of the merger ultimately hinges on the company's ability to persuade shareholders. Simply citing R&D enhancement as a justification may not be enough to alleviate minority shareholders' concerns. Key variables will include the fairness of the merger ratio, the method of future value distribution, and the provision of specific shareholder protection measures such as performance-linked stock allocations, compensation, or additional dividend promises, along with procedural transparency.
Another variable is the review process for the securities registration statement and the stock exchange's judgment regarding the listing. Financial authorities and the exchange are likely to closely examine whether the rights of common shareholders are being compromised, which could lead to additional requests for improvements or delays in the review process, potentially postponing the merger timeline. In such a case, the company may need to reassess the initially proposed merger scenario or present supplementary measures.
The Huons case is expected to serve as a litmus test for how conflicts surrounding corporate governance restructuring and the transfer of subsidiary value unfold in the pharmaceutical and bio sectors. An industry insider stated, "As regulations regarding dual listings are being refined, companies must prepare more sophisticated shareholder protection designs and transparent communication to maintain investor trust."
* This article has been translated by AI.
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