Hahn & Co. Initiates Public Tender Offer for SK D&D
Viol to Be Delisted in November Following Public Tender Offer
PEFs Holding Listed Companies Face Strategic Dilemmas
Discussions on the introduction of a mandatory tender offer system are gaining momentum. If the system is implemented, when acquiring management control from a major shareholder, the acquirer will be required to purchase shares from minority shareholders through a public tender offer. Some private equity funds (PEFs) that have invested in listed companies have moved quickly to delist these companies through public tender offers before the system is introduced, but many PEFs are now facing growing challenges in formulating their investment strategies.
According to the investment banking (IB) industry on October 4, Hahn & Company (hereafter Hahn & Co.) is set to acquire management control of SK D&D. Hahn & Co. has signed a stock purchase agreement (SPA) to acquire the entire stake held by SK Discovery (which owns 31.27% of shares) at 12,750 won per share. At the same time, the company plans to acquire all remaining listed shares through a public tender offer and proceed with a voluntary delisting.
Hahn & Co. invested in SK D&D in 2018 and has since jointly managed the company with SK Discovery as co-controlling shareholders. However, since SK D&D's real estate development business is required to disclose results on a quarterly basis and is seen as ill-suited for a listed company with general investor participation, Hahn & Co. has decided to pursue this delisting to unlock the company's growth potential.
Previously, VIG Partners also initiated a voluntary delisting of Viol, a medical device company specializing in aesthetic treatments. In May, VIG Partners acquired a 56.9% controlling stake in Viol for approximately 367.9 billion won. To acquire all minority shareholder stakes, VIG Partners conducted a public tender offer from June 12 to July 23 at 12,000 won per share. Through steady on-market purchases in August, the company secured over 95% of shares, meeting the requirements for voluntary delisting, with the delisting application scheduled for November 6.
Both Hahn & Co. and VIG Partners emphasized that they "protected the rights of minority shareholders" during their listed company acquisitions. This appears to be in response to recent amendments to the Commercial Act, which stipulate that company directors must act in the best interests of shareholders. The National Assembly's ongoing push to introduce mandatory tender offers also seems to have influenced these actions.
EQT Partners, which is preparing a public tender offer to acquire management control of Douzone Bizon, is expected to take a similar approach. EQT Partners reportedly offered the largest shareholder 120,000 won per share to acquire management control. This is the highest price ever for Douzone Bizon, and it is notable that the public tender offer price matches the price including the management control premium paid to the largest shareholder.
EQT Partners also appears to be mindful of the ongoing discussions regarding the introduction of a mandatory tender offer system. Kim Suhyeon, head of research at DS Investment & Securities, recently cited EQT Partners' acquisition of Douzone Bizon as a deal to watch amid renewed debate over the mandatory tender offer system.
Although the system has not yet been implemented, the series of public tender offers is causing PEFs to reconsider their investment strategies. JKL Partners, which is attempting to sell Lotte Insurance, is a prime example. Previous deals have repeatedly fallen through due to price issues, and the introduction of a mandatory tender offer system is expected to make negotiations even more challenging. In addition, several listed companies in which PEFs are the largest shareholders-such as M&C Solution, Classys, HPSP, K Car, and Hanatour-are currently up for sale.
The mandatory tender offer system would require an acquirer who obtains a controlling stake in a listed company to purchase shares from not only the controlling shareholder but also general shareholders under the same conditions. The system is being discussed to ensure that the management control premium, previously enjoyed only by controlling shareholders, is shared with general shareholders. There are currently five proposed amendments to the Capital Markets Act related to this issue. Within the industry, the leading proposal is to require any acquirer who purchases more than 25% of shares to become the largest shareholder to conduct a public tender offer for a certain proportion of shares.
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