Doosan Group decided to withdraw its controversial plan to merge Doosan Bobcat, a construction equipment manufacturer, with Doosan Robotics, a collaborative robot maker.
Doosan Bobcat and Doosan Robotics held their respective board meetings to cancel the comprehensive stock swap deal signed last month as part of Doosan Group’s corporate governance restructuring plan on August 29.
This decision comes a month and a half after the group announced the merger as part of a broader strategy to restructure its business around three key areas: energy, smart machines, and advanced materials. Shareholders, including the Korean Corporate Governance Forum, opposed the restructuring plan, raising concerns about the merger ratio between the two companies. The Financial Supervisory Service (FSS) also voiced criticism, leading the group to revise its original strategy.
“Even if the restructuring plan is expected to be beneficial, we cannot proceed without support from our shareholders and the market,” Doosan Bobcat CEO Scott Park and Doosan Robotics CEO Ryu Jung-hoon said in a joint letter to shareholders. The group will revisit merging Bobcat and Robotics after monitoring future legal developments.
Initially, Doosan proposed a merger plan to exchange each Doosan Bobcat share for 0.63 Doosan Robotics stock but faced severe backlash from investors for attributing greater value to the shares of the struggling robotics company. While Doosan Bobcat is a profitable company with an annual operating income of 1 trillion won, Doosan Robotics operated at a loss of 19.2 billion won last year.
However, Doosan Robotics’ stock price is higher due to investor interest in the company’s future potential in the collaborative robot market. Doosan Group explained that it followed the Capital Market Law, which requires calculating the exchange ratio based on market price, but many Doosan Bobcat shareholders criticized this ratio, calling it a case of “exploiting the law to its advantage.”
The Korean Corporate Governance Forum criticized Doosan by highlighting the flaws in the current capital market law’s criteria for calculating merger ratios in a seminar last month. A Doosan Bobcat shareholder expressed frustration at the seminar, noting that in the U.S., merger ratios are typically based on fair value rather than market capitalization.
The FSS got involved after concerns that Doosan’s merger plan does not align with the government’s value-up policy were raised among policymakers. The financial regulator demanded that Doosan Robotics amend its securities filing for the merger plan on July 24. Two days after Doosan submitted the amended securities filing, on August 8, FSS Governor Lee Bok-hyun said, “If there are any deficiencies in the securities filing, we will demand an unlimited number of amendments.” The FSS rejected Doosan’s securities filing for the second time on August 26.
Two days later, Doosan’s board of directors decided to scrap the merger plan.
However, the group decided to proceed with the first phase of the restructuring plan, which involves spinning off Doosan Bobcat from Doosan Enerbility and making it a wholly owned subsidiary of Doosan Robotics. As a result, Doosan Robotics will hold a 46.1% stake in Doosan Bobcat.
Doosan Enerbility said that the first phase of the restructuring plan is urgently needed to secure funds to expand investments in the booming nuclear energy sector. With the spin-off, Doosan Enerbility will be able to reduce its debt by 700 billion won ($525 million). The sale of non-operating assets, such as Cubex, to Doosan Corporation will raise another 500 billion won in cash, providing more than 1 trillion won in funds.
Doosan Enerbility, a nuclear power plant equipment manufacturer, is anticipating orders from overseas nuclear power plant construction projects, including the Czech Republic, Poland, the UAE, Saudi Arabia, the United Kingdom, Sweden and the Netherlands.
