Cha Partners Criticizes Refine’s Largest Shareholder’s Tender Offer as a Conflict of Interest

The activist fund Cha Partners Asset Management has criticized the large-scale public tender offer by Refine's largest shareholder, calling it a conflict of interest. Cha Partners has been a major shareholder, holding Refine shares through its managed fund since 2023.

On September 4, Cha Partners sent a public shareholder letter to the Refine board of directors containing these assertions. Refine’s largest shareholder, Realtypine, recently announced plans to acquire up to 5,199,000 Refine shares through a public tender offer at 17,600 won per share, totaling 9.15 billion won.

Cha Partners pointed out, "Hyun Seung-yoon, CEO of Realtypine, along with Realtypine’s inside directors Sung Ik-hwan and Cho Ju-young, also serve as non-executive directors of Refine. The same individuals are in key decision-making positions on both sides," adding, "It is difficult to find grounds to determine whether the Refine board conducted an independent, comparative review to assess if a more equitable and value-enhancing alternative exists for all shareholders."

The fairness of the public tender offer price was also questioned. Cha Partners stated, "The tender offer price of 17,600 won per share is significantly undervalued considering Refine’s profitability and its substantial cash and non-operating assets. As of the end of the first half of this year, Refine holds 190 billion won in cash and cash equivalents, which is about 66% of its market capitalization of approximately 290.5 billion won as of the previous day."

Furthermore, "The offer price this time is about 35% lower than the 27,159 won per share that Realtypine paid when acquiring the existing stake from the former largest shareholder, and it is also lower than Refine’s IPO price of 21,000 won," they said. "If Realtypine proceeds with the tender offer, it will increase its holdings of these undervalued Refine shares, allowing the company to gain more economic benefit, while the intrinsic per-share value for general shareholders will not increase."

Cha Partners also directed criticism at Stonebridge Capital and LS Securities, which invest in Refine through Realtypine as general partners (GPs). "Stonebridge Capital publicly advocates for responsible investment and its stewardship code, and LS Securities also claims to enhance the long-term interests of customers and investors and to promote the advancement of capital markets as a participant in the Korean Stewardship Code," Cha Partners stated. "However, if they choose to concentrate economic benefit on the controlling shareholder by capitalizing on the undervaluation of a company under their control, it could undermine trust in their fiduciary duty."

Cha Partners urged the Refine board to disclose to shareholders whether it has reviewed the economic effects of alternative measures such as Refine’s own share buyback and cancellation, its assessment of the fairness of the tender offer price, and whether procedures to prevent conflicts of interest were followed.

Finally, Cha Partners demanded a board resolution on share buybacks and cancellation, with the aim of enhancing overall shareholder value at Refine. It recommended the buyback price be set higher than the public tender offer price but lower than the board’s estimated intrinsic value per share. Cha Partners requested, "Because the tender offer period ends on the 16th, we ask the Refine board to decide whether to proceed with a share buyback by the morning of the 14th and immediately disclose the result to the market."

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