Doosan's Bobcat-Robotics proposed merger still uncertain with plunging shares, FSS pressure

Doosan Group's proposed merger continues to face mounting uncertainties with share prices plunging on the stock market and financial authorities intensifying scrutiny on the company.

Production site of Doosan Robotics in Suwon, Gyeonggi [DOOSAN GROUP]

Doosan Group's proposed merger continues to face mounting uncertainties with share prices plunging on the stock market and financial authorities intensifying scrutiny on the company.

As the Financial Supervisory Service (FSS) has openly pressured the conglomerate over its merger proposal, whether the group would be able to pursue its major governance shake-up as planned remains to be seen.

Late Friday, Doosan Robotics submitted a securities filing regarding its plan to merge with Doosan Bobcat, which is set to be spun off from its current parent company, Doosan Enerbility. The filing has been revised twice so far, with the initial version submitted on July 15 after the company’s board approved the merger deal on July 11. The first revision, filed Aug. 6, came after the financial regulator demanded that the company provide its rationale and goals for, as well as possible implications of the proposed merger.

The previously revised version would have taken effect on Saturday if the FSS had not required the additional updates. Doosan's Friday filing pushed that date to Aug. 28 pending the financial regulator's approval.

The latest revision was made to “update the financial data, which was the quarterly figure for the Jan.-March period, with the half-year financial report filed on [Thursday] Aug. 14,” according to a Doosan spokesperson. The major point of contention was whether the merger ratio unfairly favored Doosan Robotics, which would be able to secure cash through Doosan Bobcat.

Doosan Group plans to merge Doosan Bobcat with Doosan Robotics, a much smaller robot developer. According to the proposal, a new investment entity will be spun off from Doosan Enerbility, which is currently the largest shareholder of Doosan Bobcat at 46 percent. The new entity will then merge with Doosan Robotics.

Doosan Bobcat will be delisted from the Kospi bourse and incorporated under the upcoming spinoff as a wholly owned subsidiary, meaning that the equipment supplier will be controlled by Doosan Robotics.

As a result, minority shareholders’ 54 percent stake in Doosan Bobcat will be swapped with new shares issued by Doosan Robotics at a swap ratio of 0.63 to 1. This has been criticized for favoring the overvalued, money-losing Doosan Robotics at the expense of minority shareholders of Doosan Bobcat and Doosan Enerbility.

FSS Gov. Lee Bok-hyun told the press on Aug. 8 that “if there are any deficiencies in the securities filing [submitted by Doosan Robotics], we will require revisions as many times as necessary.”

Even if the FSS approves the plan, plunging share prices add further uncertainties to the deal’s viability. Doosan Enerbility will accept shareholder opposition through Sep. 10 and hold a shareholder meeting on Sep. 25 to approve the merger deal. Dissenting shareholders can demand the company to buy back their shares at a predetermined value, which is set at 20,890 won ($15.37).

As of Friday, Doosan Enerbility's share price stood at 18,750 won, down compared to 21,850 won on July 11, which may trigger appraisal rights for a significant number of shareholders. If the total value of shares requested for buyback exceeds 600 billion won, the company may repeal the merger proceedings.

Doosan Bobcat shareholders opposing the merger can also demand their shares to be bought at 50,459 won, far exceeding the company’s closing price of 40,700 won on Friday. The buyback cap was set at 1.5 trillion won for Doosan Bobcat.

Updated, Aug. 18: Added new information about the second revision filed on Friday.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]