SEOUL, Jul. 15 (Korea Bizwire) — South Korea’s listed firms called Wednesday for more defense mechanisms against hostile takeovers as the ongoing battle between Samsung Group and a U.S. hedge fund sheds fresh light on the country’s weak corporate governance structure and foreign investors’ sway over the local stock market.
The Korea Listed Companies Association urged policymakers to revise the commercial law to introduce protective measures, such as “poison pills” and “golden shares,” to ward off unsolicited takeover bids by corporate raiders.
In the face of “vulture” investors, poison pills would give shareholders the right to buy new shares quickly at a discount, while golden shares would allow its holders to object to unfavorable bids, the association said.
“The current M&A law favors attackers, while it disadvantages protectors,” the association said. “Except the share buyback, there rarely is any measure company owners can use to protect their management right.”
Calls for defense tactics against hostile takeovers or excessive management intervention have resurfaced while Wall Street hedge fund Elliot Associates has been waging an uphill battle against the merger between two key Samsung units — Samsung C&T Corp. and Cheil Industries Inc.
The hedge fund has aggressively lobbied foreign investors and minority stakeholders, and filed two injunction requests against the merger ahead of Friday’s crucial shareholder meeting. Both injunctions were rejected by a Seoul court.
Out of 1,820 companies listed on the main KOSPI and the secondary KOSDAQ markets, 134 were considered susceptible to unsolicited bids with major shareholders holding less than 33 percent and the foreign stock ownership reaching over 10 percent, a survey by the association showed.
Local business groups have long demanded protection against hostile takeovers after foreign investors launched high-profile fights against large enterprises, including KT&G Corp, the state-run tobacco maker, and SK Group, the nation’s No. 3 conglomerate, and pocketed quick profits.
Past revision bills, however, fell through due to a lack of public support for the nation’s family-run conglomerates, which are often criticized for their opaque corporate governance and management style.