Align Partners Capital Management, an activist fund based in Seoul, announced on Nov. 28 that it launched a proxy solicitation campaign to oppose Doosan Enerbility’s spin-off and merger proposal. The company has scheduled an extraordinary general meeting next month to seek shareholder approval for the proposal.
The proposal involves spinning off Doosan Enerbility’s subsidiary, Doosan Bobcat, a construction equipment manufacturer, and merging it with Doosan Robotics, another Doosan Group affiliate specializing in collaborative robots. Doosan Enerbility claims that the spin-off will allow the company to focus on eco-friendly growth initiatives, such as next-generation nuclear reactors, gas turbines, and its existing energy business.
Align has criticized the proposed spin-off, alleging that the transaction undervalues Doosan Bobcat and lacks transparency. “Doosan Enerbility is trying to sell Doosan Bobcat, one of its key subsidiaries, to Doosan Robotics at an undervalued price,” the activist fund said. Align is demanding an open competitive bidding process instead of the proposed spin-off and merger.
Doosan Enerbility has valued its 46.06% stake in Doosan Bobcat at 72,729 won ($52) per share, based on an enterprise value-to-EBITDA (EV/EBITDA) ratio of 6 times. Align argues that this estimate is far below the valuation multiples of comparable companies in the industry.
According to Align, peers of Doosan Bobcat are valued at an average EV/EBITDA multiple of 11, and Doosan Bobcat itself was valued at 12 times EV/EBITDA when Doosan Group acquired the company. By applying an EV/EBITDA multiple of 11, Align estimates that Doosan Bobcat’s shares would be worth roughly 130,000 won each, or approximately 6 trillion won in total.
“It is in the best interest of the company and its shareholders to launch an open competitive bidding process before transferring the Doosan Bobcat stake to a related party at an arbitrary price,” Align said in a statement. The fund added, “If Doosan Robotics or other affiliates of Doosan Group wish to acquire the Doosan Bobcat stake, they should participate in the bidding process and submit a competitive offer.”
