President Lee Jae Myung said hostile mergers and acquisitions (M&A) must become more active to break the undervaluation of the domestic stock market. He urged swift decisions on the mandatory tender offer system, which has been slow to be legislated.
Lee held a capital market policy meeting at the Korea Exchange in Yeouido, Seoul, on the 13th. Experts from academia and the financial investment industry attended. Lee cited hostile M&A as a key mechanism for normalizing the market.
Lee raised the point that there is no M&A even at companies with a price-to-book ratio (PBR) of 0.25. He said this means "the system is not working." He pointed out that there is a sentiment in Korea that views hostile M&A as immoral. He also said policy authorities have, in some respects, tacitly defended against it. He instructed a comprehensive review of systems that block hostile M&A.
He also cited listed companies where controlling shareholders and related parties hold 70 to 80 percent of shares. The criticism is that they operate like private companies even though free-float shares are below 10 percent. Lee said a way should be found to delist them by revising the listing maintenance requirements.
Opinions among attendees were divided on the mandatory tender offer. Kim Woo-chan, professor of business administration at Korea University, argued that no country has adopted the 50% plus one share approach. He also said that an empirical study of 41 countries showed the 100% approach did not discourage M&A. Park Byung-geon, CEO of Daishin Private Equity, warned that the 100% approach would increase the funding burden on acquirers. He argued that domestic companies could fall into foreign capital hands.
Lee conducted instant polls both at the venue and online. At the venue, many favored 50% plus one share. In the online chat window, most called for introducing the 100% approach.
Lee assessed that a 100% tender offer is ideal. However, he judged that if attempts at M&A decline, opportunities for the market as a whole could shrink. He said he leans toward "growing the pie, even if it means being criticized." At the same time, he said, "I cannot do as I please." He added that he hopes the party will continue discussing the issue without letting deliberations drag on.