[Exclusive] Minority Shareholders Erupt as "Gompyo" Faces Daehan Flour Mills' Biggest Crisis Over 6 Trillion Won Price-Fixing Scandal

Minority Shareholders With 1% Stake Demand "Share Buyback and Stock Split"


Shareholder Proposals Were Also Rejected in 2008


Debate Over Shareholder Returns Reignites Amid Flour Price-Fixing Investigation

Minority shareholders have begun fighting back against Daehan Flour Mills, which has been implicated in a flour price-fixing scheme worth over 6 trillion won. Since its establishment in 1952, the company has been regarded as a leading figure in Korea’s flour milling industry, but it recently faced indictments for both its CEO and the corporation itself in the flour cartel case, as well as a National Tax Service investigation over alleged tax evasion amounting to 120 billion won. In response, Daehan Flour Mills' minority shareholders plan to hold management and the owner family accountable and push for expanded shareholder returns at the regular general meeting scheduled for the end of this month.

According to the industry on March 4, Daehan Flour Mills will hold its 75th regular general meeting of shareholders at its Incheon plant in Jung-gu, Incheon, on March 27. In addition to the approval of financial statements, the meeting agenda includes “partial amendments to the articles of incorporation related to stock split” and “acquisition of treasury shares,” both of which were proposed by minority shareholders. The company stated, “The proposer’s shareholding ratio is in the 1% range.”

According to the Commercial Act, shareholders who have held at least 0.5% of the total voting shares of a listed company for more than six months can propose agenda items for a shareholders’ meeting. The stock split requested by minority shareholders is intended to increase the number of circulating shares and activate trading. The proposal to acquire treasury shares calls for the company to use its cash holdings to buy back its own shares. If the company repurchases and cancels treasury shares, earnings per share (EPS) will rise, and shareholder value is expected to increase.

This kind of shareholder proposal is driven by the fact that, despite a sharp rise in net profit, the payout ratio remains below 10%, causing the stock’s market value to fall well short of its asset value. Daehan Flour Mills decided to pay a year-end dividend of 4,000 won per share last year. The total dividend payout amounts to approximately 6.599 billion won, up from the previous year’s 3,500 won (approximately 5.77 billion won). The dividend yield stands at 2.6%. However, of the net profit of 70.1 billion won, only about 6.6 billion won was paid out as dividends, resulting in a payout ratio of around 9%. This is low compared to the average payout ratio of listed companies, which is 20-30%.

Daehan Flour Mills has gradually increased its dividends per share, from 2,000 won in 2019-2020, to 2,500 won in 2021-2023, to 3,500 won in 2024, and to 4,000 won last year. The total dividend payout rose from 3.3 billion won in 2019 to 6.6 billion won in 2025. However, despite the increase in net profit, the return rate is still considered low.

On a consolidated basis, Daehan Flour Mills posted sales of 1.3751 trillion won last year, similar to the previous year’s 1.3747 trillion won. Operating profit decreased by 13.9% to 62.2 billion won, but net profit increased by 43.7% to 70.1 billion won. This was due to a decrease in impairment losses on tangible assets and equity-method investments. At the end of last year, consolidated total assets stood at 1.536 trillion won, total liabilities at 431.5 billion won, and total equity at 1.1045 trillion won.

Daehan Flour Mills, established in 1952, is a leading domestic flour milling company producing flour and feed. The company is currently under simultaneous investigation by the Fair Trade Commission for price-fixing allegations and by the National Tax Service for tax-related issues. With these external risks persisting, the issue of shareholder return has also emerged as a key agenda item at the shareholders’ meeting.

Whether the proposals are passed is expected to depend on the voting preferences of the largest shareholder and other shareholders. As of the end of September last year, D&B Company, the largest shareholder, held a 27.82% stake, and Chairman Lee Gunyoung of Daehan Flour Mills held 7.01%, with related parties holding a combined 42.33%. As of the end of 2024, minority shareholders number 5,559, accounting for 99.59% of all shareholders. The shares they hold amount to 42.54%, which is similar to the largest shareholder’s side. If a vote showdown materializes, the casting vote may rest with other shareholders.

Daehan Flour Mills has previously experienced shareholder proposals. At the 2008 regular general meeting, shareholders demanded a dividend of 12,000 won per share, but the company’s proposal of 3,000 won was approved. At that time, a shareholder proposal regarding the appointment of an auditor was also automatically discarded. This shows that, due to the company’s shareholding structure, shareholder proposals have failed to pass in the past.

Industry experts believe that the chances of the minority shareholder proposals passing this time are not high. However, with both the price-fixing and tax investigations underway, renewed shareholder calls for capital allocation have resurfaced, drawing attention to the outcome of the meeting. Another variable is that, under the Lee Jaemyung administration, shareholder return policies have been strengthened, amplifying the voice of minority shareholders.

This year’s meeting will also include items on the reappointment of Chairman Lee Gunyoung and Group Planning Director Lee Jongmin, as well as the new appointment of President Lee Jinseong. Alongside a vote of confidence for management, shareholder return policies will also face scrutiny.

This content was produced with the assistance of AI translation services.