Dongwon yields to shareholders and adjusts merger ratio to less favor owner family

[Source: Dongwon Group]

South Korea’s leading seafood and logistics conglomerate Dongwon Group has adjusted a merger ratio between Dongwon Industries and Dongwon Enterprise, yielding to minority shareholders’ skepticism of favoritism toward owner family.

Dongwon Industries shares rose to the upper limit of 10 percent in after-hours trading on Wednesday. Its shares rose 2.28 percent to 246,500 won ($193.70) in the early session of Thursday.

Dongwon Industries and Dongwon, after holding board meetings on Wednesday, announced that they changed the merger ratio between Dongwon Industries and holding firm Dongwon Enterprise from 1 to 3.8385530 to 1 to 2.7023475.

It is the adjustment to the restructuring plan a month ago, outlining the plan of Kospi-listed Dongwon Industries absorbing Dongwon Enterprise to become Dongwon’s new holding entity.

The previous merger ratio sparked a controversy with institution arguing Dongwon Industries was underestimated while that of Dongwon Enterprise was overvalued to favor the owner family.

The group changed the valuation for Dongwon Industries, raising its price per share from 248,961 won to 382,140 won based on asset value.

As the result, the owner family’s stake in the merged company would also be eased from 65.8 percent in the original plan to 58.6 percent. The stake of the founder and honorary Chairman Kim Jae-chul will decrease from 17.38 percent to 15.49 percent, with his second son Kim Nam-jung, vice-chairman and de factor leader of the group down from 48.43 percent to 43.15 percent.

The group has decided to amend its reorganization plan to improve shareholder value amid criticisms from its minority shareholders and civic groups.

Following the merger, the governing structure at the group will be simplified so that faster decision-making process is expected on top of greater synergy between the two companies.

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