Truston Says "Taekwang Industrial Must Either Follow Listing Rules or Voluntarily Delist"

Seven Shareholder Proposals Including Voluntary Delisting
"PBR of 0.2 Times and 1% Payout Ratio" Criticized

On the 12th, Truston Asset Management announced that it had sent an open shareholder letter to the board of directors of Taekwang Industrial demanding measures to enhance corporate value, and had submitted seven shareholder proposals for the regular general shareholders' meeting in March, including a voluntary delisting agenda item.

Truston argued that Taekwang Industrial is ignoring the discipline of the capital market and is abusing its listed status as a means to reduce inheritance taxes for controlling shareholders, including former Taekwang Group Chairman Lee Hojin. It pointed out that Taekwang Industrial's price-to-book ratio (PBR) is 0.2 times, placing it among the lowest not only on the KOSPI but also among all listed companies, and that its effective PBR is only 0.17 times even after reflecting the estimated 4 trillion won worth of real estate assets.

The dividend policy was also cited as a problem. Truston said that Taekwang Industrial's 10-year average payout ratio has remained in the 1% range, with the total amount of dividends going to minority shareholders at around 400 million won per year. While the 10-year average payout ratio of the three listed Taekwang Group companies (Taekwang Industrial, Daehan Synthetic Fiber, and Heungkuk Fire & Marine Insurance) is only 1.3%, the payout ratio of unlisted affiliates such as Heungkuk Life Insurance and Heungkuk Securities is 33%, which Truston analyzed as being 30 times higher than that of the listed companies.

The independence of the board of directors was also raised as an issue. Referring to the fact that on June 27 last year, ahead of the amendment to the Commercial Act, Taekwang Industrial's board pushed for the issuance of 320 billion won in exchangeable bonds (EB) backed by all of its treasury shares but withdrew the plan after backlash, Truston criticized that "all board members except the independent director recommended by Truston voted in favor of the proposal."

Truston submitted a total of seven shareholder proposals for this shareholders' meeting. The core proposal is the full purchase of 230,000 freely tradable shares (21.1%) held by minority shareholders, followed by voluntary delisting. If the company chooses to remain listed, Truston is demanding: separate elections to appoint former lawmaker Chae Yi-bae and attorney Yoon Sangnyung as independent director candidates; the introduction of a lead independent director system; the sale or development of non-operating assets such as those in Seongsu-dong; the immediate retirement of 20% of the company's treasury shares (24.4% of total shares); the establishment and public announcement of a corporate value enhancement plan; and a 1-for-50 stock split.

Truston stated, "We plan to engage in a proxy fight together with shareholders at the general meeting," and called on the company to provide a forward-looking response by March 11.

In relation to this, an official at Taekwang Industrial said, "Amid a structural downturn in the petrochemical industry, Taekwang Industrial has been suffering losses for four consecutive years," adding, "In this situation, the best way to enhance corporate value is not asset sales or a stock split, but to identify new growth engines and reorganize the business."

The official went on to criticize Truston, saying, "While the company is desperately searching for ways to secure its future survival, Truston is once again fixated only on buying up minority shareholders' shares and pushing for delisting so it can sell and walk away."