[Inside Chodong] Corporate Value and Shareholder Value

Minority shareholders of Doosan Enerbility are going to great lengths, including litigation, to secure the shareholder registry and have been sending shareholder letters since last week. This action aims to highlight the unfairness of the business restructuring plan promoted by the Doosan Group. On the 3rd, they also delivered a statement to the National Pension Service Fund Management Headquarters urging opposition to the restructuring plan and the exercise of the right to request stock purchase. Among 480,000 shareholders, only 235, less than 1%, pooled their resources together. The Chinese characters for Doosan (斗山) mean 'a measure of grain' and 'mountain.' Ironically, the minority shareholders are embodying the founding spirit of Doosan’s founder, Park Seung-jik, who said, "Let’s pile up one measure after another without rest to build a mountain."

The second phase of Doosan’s business restructuring is underway. The plan to have Doosan Robotics, which is considered 'overvalued,' absorb the 'cash cow' Doosan Bobcat sparked controversy over shareholder interest infringement, leading Doosan to voluntarily end the first phase. However, they are determined to succeed in the second phase. Yet, the path to the finale is fraught with challenges.

The second phase involves establishing an investment business division within Doosan Enerbility that holds Doosan Bobcat, followed by a merger with Doosan Robotics. The problem is that from the perspective of Doosan Enerbility shareholders, they still have to part with Doosan Bobcat, so nothing has fundamentally changed from the first phase.

What shareholders want most is communication. They cannot understand the benefits of splitting off Doosan Bobcat, which accounted for 97% of the group’s total operating profit last year. There is also a need for sufficient explanation regarding concerns such as how borrowing capacity will change if Doosan Enerbility loses the Doosan Bobcat shares it has pledged as collateral, and how much of the assets related to the 700 billion KRW borrowing are involved.

Another key issue is the split ratio for the investment business division and the merger ratio with Doosan Robotics. The company set the split ratio at 1 to 0.247 based on net asset value and the merger ratio at 1 to 0.128 based on market price. Simply put, Doosan Enerbility shareholders receive 0.03 shares of Robotics stock per share in exchange for giving up Bobcat, which is criticized as unfair compensation.

Even financial authorities have unusually pointed out the valuation method of the newly established split-off company and expressed the need for revision. Doosan, currently recalculating the ratios, is hoped to find a solution to win back shareholders’ trust.

Doosan is envisioning a major restructuring around three pillars: clean energy, smart machines, and advanced materials. Most shareholders are unlikely to dispute the management’s judgment to focus on next-generation growth engines in this era of great transformation. Especially shareholders who have suffered since the 2011 Fukushima nuclear accident and the subsequent nuclear phase-out may even harbor new hopes. At this point, it is important to remember that corporate value and shareholder value are not different.

It is regrettable that the voices of the Doosan family were not heard at this critical moment for the group. Neither Park Jung-won, chairman of Doosan Group and the largest individual shareholder of Doosan Enerbility, nor his brother Park Ji-won, chairman of Doosan Enerbility, stepped forward to persuade shareholders. While the owners cannot intervene in everything, if they had shown sincerity by directly persuading shareholders, the outcome might have been different.

Doosan, which started as a textile store in 1896, has survived 128 years through continuous innovation, expanding into cosmetics, beer, and heavy industries. In Jongno 4-ga, where the 'Park Seung-jik Store,' the origin of Doosan Group, once stood, a Doosan time capsule lies buried, scheduled to be opened in 2096, the 200th anniversary of its founding. What use is it to be a long-lived company of over 200 years if it is not welcomed by its shareholders?

Industrial IT Department_O Hyungil