Truston Urges Taekwang Industrial to Reassess Value-Up Plan: "Dividend Increase, Stock Split"

Written Response Demanded Within 30 Days
"Move Beyond Rubber-Stamping—Demonstrate Checks and Balances by the Board"

Truston Asset Management (Truston), the second-largest shareholder of Taekwang Industrial, has resumed its aggressive shareholder activism against the company's management and independent board of directors. Truston has labeled Taekwang Industrial's value-up plan, announced last month, as an "inadequate report" and demanded a complete re-evaluation. The asset manager has also warned that, if its demands are not met, it may convene an extraordinary general meeting of shareholders and take legal action.

On July 14, a Truston spokesperson stated, "We have sent an open shareholder letter to Taekwang Industrial's management and independent board of directors." Truston has requested that both the management and the independent board respond in writing within 30 days, and the company plans to determine its next steps based on the outcome of these responses.

"Severe Liquidity Drought... Calls for 5-to-1 Stock Split"

Truston first asserted, "The role of the independent board should not be limited to simply rubber-stamping management proposals," and demanded written proof of whether the "checks and balances" promised by the board last month were actually exercised. In a public inquiry, Truston asked whether, during the formulation of the value-up plan announced on June 30 (which included dividends, treasury shares, and a stock split), the independent board raised objections to the management's draft and worked to mediate any differences. Truston also inquired whether there were in-depth discussions from a financial leverage perspective regarding the company's "debt-free management policy."

Truston also rebutted Taekwang Industrial's argument that the company's undervaluation is due to market conditions and profitability. It pointed out that while Taekwang Industrial's return on equity (ROE) stands at 2.1%, which is higher than the industry average of 1.8%, the real reason for undervaluation lies in the "absence of shareholder-friendly policies"—as the company has frozen dividends and withheld profit-sharing for the past 32 years.

According to the letter, the three listed companies under Taekwang Group have maintained an average payout ratio of only 1.3% over the past decade, while unlisted affiliates owned by the controlling family had a payout ratio as high as 33%—a tenfold difference. In response, Truston requested a concrete plan to gradually raise this year's payout ratio to 10%, with a goal to reach the KOSPI average of 40% by 2030.

Currently, Taekwang Industrial's actual free-floating shares total about 230,000 shares, which is only 1% of the KOSPI average. Its average daily turnover is also below 0.2%, just one-fifth of the KOSPI average (1.15%). Truston criticized the company's stance that "liquidity does not affect intrinsic value," stating that it "denies the very purpose of being listed on the stock market." Truston called for an immediate stock split of at least 5-to-1 or a bonus issue.

"Depending on Responses, EGM and Legal Action Under Consideration"

Truston also criticized Taekwang Industrial's plan to use its treasury shares (24.4%) as M&A funding, describing it as "an excuse to avoid shareholder returns." Truston argued that, given the stock’s extremely low price-to-book ratio (PBR) of 0.22 times, using treasury shares in this context is equivalent to issuing new shares at an unreasonably low price relative to their real value.

In particular, Truston cited issues with recent real estate transactions, including purchases of the Dosan Park building (KRW 20 billion), Heungkuk Life headquarters (KRW 51.2 billion), Courtyard Marriott Namdaemun (KRW 50 billion), and loans to a major shareholder’s child’s real estate development company (KRW 180 billion)—totaling KRW 301.2 billion in cash spent on real estate over the past two years. Truston condemned this, stating, "While cash reserves are being lavishly spent on real estate, using KRW 250 billion worth of treasury shares as an excuse to dilute shareholder stakes is self-contradictory and undermines existing shareholder value."

A Truston spokesperson added, "We will determine the level of further action after reviewing the responses from management and the independent board." The spokesperson continued, "If the issue is ultimately not resolved, we will consider all available options, including convening an extraordinary general meeting of shareholders. We will also not rule out legal review regarding whether directors have fulfilled their fiduciary duties (Article 382-3 of the Korean Commercial Act)."

This content was produced with the assistance of AI translation services.