Doosan Hit by Martial Law Fallout... Business Restructuring Fails Amid Sharp Stock Price Drop (Comprehensive)

Doosan Enerbility Stock Plummets After Martial Law
Jumaecheong Increases 600 Billion Won ↑ 'No Practical Benefit' Judgment
Fails to Secure Investment Funds for Gas Turbines, SMR, and Robots

Doosan Group's plan to split and merge Doosan Bobcat, which was being pursued as a future growth engine, has fallen through.

On the 10th, Doosan Enerbility held an extraordinary board meeting and announced that it would not hold an extraordinary general meeting of shareholders to approve the split and merger plan transferring its stake in Doosan Bobcat to Doosan Robotics. The extraordinary general meeting was scheduled for the 12th.

As a result, the split and merger plan between Doosan Enerbility and Doosan Robotics for Doosan Bobcat has been derailed. In July this year, Doosan Group announced a business restructuring centered on three pillars?clean energy, smart machines, and semiconductors & advanced materials?to maximize business synergy and enhance future competitiveness. As part of this restructuring, the group pursued a split and merger among Doosan Enerbility, Doosan Bobcat, and Doosan Robotics. However, as concerns grew that this restructuring would harm the interests of general shareholders of Doosan Enerbility and Doosan Bobcat, Doosan Group withdrew the plan at the end of August and resumed the split and merger plan with adjusted merger ratios from October.

Due to an unexpected variable called martial law, Doosan Enerbility’s stock price plummeted, resulting in a larger-than-expected cost burden and eliminating the merger’s benefits. When announcing the merger plan, Doosan Group proposed a 'stock purchase claim right' as an alternative, which would allow buying shares at a promised price if the stock price falls below a certain level. The planned purchase price for Doosan Enerbility’s shares was 20,890 KRW, but after the merger announcement in October, the stock price, which had been consistently above the planned purchase price, sharply dropped after the martial law on the 3rd, closing at 17,180 KRW on that day.

Given this situation, the National Pension Service’s Stewardship Committee decided to vote in favor only if the stock price as of the 10th was higher than the planned purchase price and abstain otherwise. The committee explained that this decision was to secure the stock purchase claim right.

The National Pension Service holds 44,478,941 shares of Doosan Enerbility, accounting for 6.94% of the total issued shares. If the National Pension Service exercises its stock purchase claim right, the amount would far exceed the 600 billion KRW limit for the stock purchase claim right, eliminating the benefits of the split and merger. According to the securities registration statement, Doosan Enerbility and Doosan Robotics can cancel the split and merger contract if the stock purchase claim rights from shareholders opposing the split and merger exceed 600 billion KRW. The 600 billion KRW is the amount Doosan Enerbility promised to invest in growth businesses such as gas turbines and small modular reactors (SMR) upon successful split and merger.

There is a prevailing view that it will be difficult to pursue the merger again in the future. One of the merger’s purposes was to invest in facilities related to new nuclear power plants and nuclear power exports, but with the likelihood of a regime change following martial law, the nuclear power policy is expected to be overturned again. An industry insider said, "The continuity of nuclear power policy has been shaken due to the martial law and impeachment political situation, causing Doosan Group’s merger to suddenly fall through. It seems necessary to find alternative funding sources not only for nuclear power but also for investments in the robotics business."

However, since the synergy from merging Doosan Robotics and Doosan Bobcat is still needed to capture the robotics market, the possibility of reattempting the merger is also being discussed. Another industry insider said, "The purpose of this merger was also to create synergy between Bobcat and Robotics in the robotics business. Since the recent stock price drop is due to short-term uncertainty, if the stock price returns to its proper track, the merger could be pursued again."