Doosan Group’s planned merger between Doosan Bobcat and Doosan Robotics faces a new challenge, as the National Pension Service (NPS) recently opposed another merger, raising concerns that it may apply the same criteria to Doosan’s deal. The NPS opposed the merger between SK Innovation and SK E&S, criticizing the lack of effort in adjusting the merger ratio.
Despite its current losses, Doosan Robotics has a higher market capitalization than Doosan Bobcat, which earns 1 trillion won in annual operating profit, due to its promising future as a collaborative robot maker. Doosan proposed exchanging 0.63 shares of Robotics for each share of Bobcat, which has sparked strong opposition from some Bobcat shareholders who invested in high-quality stocks.
Under the Capital Markets Act, merger ratios are based on market value, but adjustments of up to 10% can be made if the valuation is deemed inadequate. If Doosan Bobcat’s value is increased by 10% and Doosan Robotics’ value is decreased by 10%, the share exchange ratio would rise from 0.63 to 0.77.
Lee Bok-hyun, head of the Financial Supervisory Service (FSS), said on a current affairs TV program on Aug. 25, “While efficient markets reflect value in market prices, reality often does not,” adding that “premiums or discounts can still be applied even when using market value as a basis.”
He further noted that “the appropriateness of the merger between Doosan Bobcat and Doosan Robotics will be determined at the shareholders’ meeting.” This marks a shift from his Aug. 8 remark that “if there are deficiencies in Doosan’s securities registration statement, we will demand unlimited corrections.” The FSS is likely to allow Doosan’s shareholders’ meeting to proceed.
Doosan made a correction on Aug. 6 in response to the FSS’s request last month and made another voluntary correction on Aug. 16. Even if additional corrections are requested, Doosan plans to hold the shareholders’ meeting as scheduled on Sept. 25.
A voting showdown is anticipated at the shareholders’ meeting. The merger between Doosan Bobcat and Doosan Robotics requires approval from two-thirds of attending shareholders and one-third of all shareholders. Doosan Enerbility and related parties hold 46% of Doosan Bobcat, the NPS holds 6.5%, and minority shareholders hold 34%. With the stock price falling below the buyout rights and potential opposition from the NPS and minority shareholders, the outcome of the merger remains uncertain.
