[Exclusive] Korean Daiso Threatened in Management Rights by Japanese Shareholders... "Expand Dividends" Ultimatum

2nd Largest Shareholder Japan Daiso Sangyo
Two Japanese Directors Registered
Asung Daiso "Current Management System
Remains Stable"

Japan's Daiso Sangyo (大創産業·Daiso Sangyo) has officially started participating in the management of the Korean household goods store 'Daiso.' Until now, it had remained a passive investor as the second-largest shareholder, but due to various management changes, it has completely reversed its stance. Since Daiso Sangyo declared its intention to participate in management, conflicts have arisen between the two companies over board composition and dividend calculations.

According to a report compiled by Asia Economy on the 29th, Aseong Daiso, which operates domestic Daiso stores, appointed two internal directors and one auditor from Japan's Daiso Sangyo at its shareholders' meeting last March, which was confirmed belatedly. When Daiso Sangyo, holding 34.21% of Aseong Daiso's shares as the second-largest shareholder, asserted its shareholder rights and demanded management participation, Aseong Daiso yielded board seats and an auditor position. As a result, Aseong Daiso's board was reorganized to include three domestic directors, including Chairman Park Jung-bu, two Japanese directors, and one auditor each from Korea and Japan. Until now, Aseong Daiso had no personnel exchanges or joint management relations with Daiso Sangyo beyond equity investment.

Despite the changes in board composition, Aseong Daiso emphasized that the current management system would not be shaken. An Aseong Daiso official stated, "Domestic directors hold the majority, so the opinions of Japan's Daiso Sangyo are only considered as references." It was also explained that given the shareholding ratio, it would be difficult for Daiso Sangyo to demand additional board seats. Currently, the largest shareholder of Aseong Daiso is Aseong HMP with 50.02%.

Since Daiso Sangyo declared its management participation, the two sides have been in conflict over several issues, including demands to increase dividends following board participation. So far, Aseong Daiso has paid approximately 15 billion KRW in dividends to Daiso Sangyo in three installments since 2014, based on its shareholding. However, considering the recent sales growth of Aseong Daiso, there are calls to raise the amount. In fact, sales of the Korean Daiso business were around 1 trillion KRW in 2014, exceeded 2 trillion KRW in 2019, and approached 3 trillion KRW last year.

The relationship between the two companies began when Chairman Park Jung-bu, a former salaryman, established the household goods specialty sales company Aseong Trading Co., Ltd. in 1992 and supplied products to the 100-yen shop 'Daiso (大創)' operated by Daiso Sangyo in Japan. Aseong Trading changed its corporate name to Aseong Industry in 1996 and opened a household goods store called 'Asco Even Plaza' in Cheonho-dong, Gangdong-gu, Seoul, the following year. Subsequently, Daiso Sangyo requested exclusive supply rights, and Chairman Park agreed on the condition of a 400 million yen (approximately 3.8 billion KRW) investment, which was successfully arranged. In September 2001, the corporate name was changed to Daiso Aseong Industry, the store name to Daiso, and 34.21% of shares were transferred to Daiso Sangyo as consideration for the investment.

Aseong Daiso has defended itself against public criticism that it is a 'Japanese company' by emphasizing that Daiso Sangyo had only invested without participating in management and that no royalties were paid to Daiso Sangyo. However, with Daiso Sangyo's management participation and demands for shareholder rights, it is uncertain whether Aseong Daiso's image as a 'Korean company' will be maintained going forward. Furthermore, if the dividend amount increases, the burden on expenditures will grow, potentially worsening the profit structure. From Aseong Daiso's perspective, considering options to divest the Japanese shares is possible, but the consensus is that it is realistically difficult. It is not easy to proceed with share liquidation against Daiso Sangyo, which is already actively participating in management and expanding its role.