"Nullifying the Effect of the Commercial Act Amendment"... Asset Managers Protest Rushed Push for Mandatory Tender Offer

Joint Statement and Press Conference by 18 Asset Management Companies

"Bill Essentially Sanctions Discrimination Against Minority Shareholders"

Calls for Public Discussion and Deliberation

At a press conference held on the 30th in Yeongdeungpo-gu, Seoul, representatives of ten asset management companies urged for the postponement of the mandatory tender offer system introduction bill, which was scheduled for plenary passage in the National Assembly the following day.

Domestic and foreign asset management companies have strongly called for the postponement of the plenary session vote on the mandatory tender offer system introduction bill. They criticized the bill for including provisions that could allow for discrimination between controlling and minority shareholders—in contrast to the government's direction to enhance shareholder rights and normalize the capital market.

On September 30, representatives from domestic and foreign asset management companies—including Life Asset Management, Rainmaker Asset Management, Must Asset Management, Value Partners Asset Management, Align Partners Asset Management, and VIP Asset Management—held an emergency press conference at the Kensington Hotel in Yeongdeungpo-gu, Seoul, to reiterate their position. This follows their release of a joint emergency statement the previous day, in another attempt to rally public opinion on the issue.

The asset managers stated that although they support the adoption of the mandatory tender offer system in principle, they take issue with the provision allowing for a 'prior acquisition,' where controlling shareholder stakes are purchased first. The mandatory tender offer system requires that, in merger and acquisition deals involving a listed company, the acquirer must purchase not only the controlling shareholders' stakes but also those of minority shareholders.

The current bill contains a provision requiring a tender offer for only up to 50% plus one share of the total outstanding shares, rather than requiring the purchase of all shares. This appears to reflect concerns within the business community that full share purchases could suppress M&A activity by making deals more burdensome.

The main criticism is directed at the allowance of 'prior acquisition,' where the controlling shareholders' stakes can be acquired off-market before any offer is made to minority shareholders. Lee Changhwan, CEO of Align Partners, pointed out, "The average controlling shareholder ownership among KOSPI 200 companies is 44%. This means the acquirer could buy the controlling stake first, then purchase only 6% from minority shareholders to meet the requirement of acquiring 50% plus one share—providing a legal basis for blatant discrimination against ordinary shareholders."

In fact, of the 35 merger and acquisition deals involving listed companies since 2015, in 15 cases, the controlling shareholders owned more than 50% of the company's shares. In such cases, ordinary shareholders could end up with no opportunity to sell even a single share in the tender offer.

A system that legally acknowledges one-sided discrimination..."Proportional tender offer needed"

The asset managers proposed a 'proportional tender offer' as an alternative, whereby both controlling and ordinary shareholders could participate in the tender offer and sell their shares in the same proportion. For example, if a company with a controlling shareholder holding 40% of its shares is put up for sale and all shareholders tender their entire holdings, the acquirer would purchase approximately 20% from the controlling shareholder and about 30% from minority shareholders out of the required 50% plus one share acquisition. They noted that Japan’s Z Holdings adopted a similar approach when acquiring a 50% stake in the online mall ZOZO—the founder, who held a 37% stake, also participated in the tender offer alongside ordinary shareholders and ended up retaining an 18% stake.

Kim Minkook, CEO of VIP Asset Management, criticized the current mandatory tender offer bill for perpetuating a 'dual pricing structure,' where shares owned by controlling and minority shareholders are traded at different prices. He said, "The bill effectively puts its stamp of approval on a system where one share from a controlling shareholder is sold at a management control premium, while one share from a minority shareholder is only traded at the market price. Ultimately, controlling shareholdings will converge at 50% plus one share, and this stake will command the highest control premium."

There was also criticism that the bill is being pushed through without sufficient feedback or public deliberation. Lee Chaewon, Chairman of Life Asset Management, stated, "The funds managed by asset managers are, in the end, the people’s retirement funds. Adequate public discussion and social consensus are needed before moving forward."

Along with Chairman Lee, attendees at the meeting included Yong Hwansuk and Lee Chanhyeong, CEOs of Petra Asset Management; Kim Minkook, CEO of VIP Asset Management; Kim Hyungkyun, Head of Department at CHAR Partners; Lee Changhwan, CEO of Align Partners; Kim Yeonsu, CEO of Kansus Asset Management; Kim Bonggi, CEO of Value Partners; Baek Jiyoon, CEO of Blash Asset Management; Kim Jiyeol, Director at Quad Asset Management; and Jeong Yongu, CEO of Rainmaker Asset Management. In total, 18 asset management companies, including foreign entities, participated in the joint statement, with combined assets under management totaling 87 trillion won.

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