[Listed Companies at a Crossroads] iWIN ① Uses Company Built Through "Related-Party Transactions" to Increase Owner Family's Stake

Most of iWIN Auto's revenue comes from iWIN
Only Vice President Shin Gwangjin to receive 190,000 new shares
Minority shareholders cannot exercise appraisal rights despite stake dilution

KOSDAQ-listed iWIN has decided to absorb iWIN Auto, an affiliate it built up through related-party transactions. Through the merger, iWIN Auto's largest shareholder, iWIN Vice President Shin Gwangjin, will acquire a stake in iWIN for the first time. Shin is the younger brother of iWIN Chairman Shin Gyujin.

Minority shareholders, meanwhile, are expected to face controversy as they will be unable to exercise appraisal rights under the “small-scale merger” procedure, even as the issuance of new shares dilutes the value of their holdings.

According to the Financial Supervisory Service's electronic disclosure system on October 29, iWIN held a board meeting on October 26 and resolved to absorb its unlisted subsidiary iWIN Auto at a merger ratio of 1 to 1.29.

iWIN is a mid-sized parts supplier specializing in manufacturing automotive comfort systems (CCS), including seat heaters, heated steering wheels, and ventilated seats. It is an oligopolistic supplier that provides 94% of the seat heaters used in domestically produced vehicles. Hyundai Motor (66.5%) and Kia (32.5%) account for 99% of its sales. In the first half of this year, it recorded consolidated revenue of KRW 56.5 billion and operating profit of KRW 5.6 billion.

iWIN Auto manufactures and assembles automotive electronics PCBs using surface-mount technology (SMT), and produces electronic control units (ECUs). It recorded revenue of KRW 34 billion last year. Over the past 10 years, 95% to 100% of iWIN Auto's revenue has come from iWIN. In effect, iWIN Auto would struggle to survive without iWIN.

iWIN Auto's shareholders are iWIN (52.9%), Vice President Shin Gwangjin (37.2%), and the company itself (10%). In the merger, no new shares will be issued for the iWIN Auto shares held by iWIN or for iWIN Auto's treasury shares. Only Vice President Shin Gwangjin will receive 192,252 new iWIN shares, equivalent to approximately 4.4%.

As a result, the stake held by iWIN's controlling family, including Chairman Shin Gyujin, will increase from 30.8% to 33.8%. Although the chairman's stake will be slightly diluted by the issuance of new shares, the addition of Vice President Shin's stake will increase the family's control.

By contrast, the value of ordinary shareholders' holdings will be diluted. The ownership stake of other minority shareholders, who held 64% of the shares, will fall to the 61% range after the new shares are issued for the merger. In effect, the controlling family will take exclusive benefit of iWIN Auto, which was built up through related-party transactions with iWIN.

Moreover, minority shareholders are in a difficult position to oppose the merger. Because the number of new shares to be issued does not exceed 10% of the existing shares, the merger is being pursued as a “small-scale merger.” Since board approval will replace shareholder approval at a general meeting, shareholders who object to the merger ratio or changes to the ownership structure cannot exercise appraisal rights. Unless shareholders holding at least 20% of iWIN's issued shares join together to oppose the merger, minority shareholders will have to accept the dilution of their stakes.

iWIN was asked about the merger and the increase in the controlling family's stake, among other matters, but the company said, “We will not comment.”

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