The Financial Supervisory Service (FSS) has put the brakes on Emart's plan to make Shinsegae Food a wholly owned subsidiary. The move appears to reflect heightened awareness of minority shareholder pushback against what they call a "bargain-price buyout," as the importance of "shareholder rights protection" has grown under the Lee Jae-myung government. Analysts also note that this is the first case since the Ministry of Justice announced its "Guidelines on Standards of Conduct for Directors," signaling the regulator's intent to conduct a thorough review.
According to the FSS's Electronic Disclosure System on Wednesday, the FSS on Tuesday demanded that Emart file an amended securities registration statement for its comprehensive share exchange and transfer, which was originally submitted on the 20th. The FSS also issued a correction order on the material disclosure report filed by Shinsegae Food regarding the share exchange and transfer decision.
In its disclosure, the FSS stated: "As a result of reviewing the securities registration statement (comprehensive share exchange and transfer) submitted on the 20th, we are requesting the filing of an amended registration statement because the registration statement did not meet the required format, contained false entries or representations regarding material matters or omitted material matters, and the entries or representations of material matters were unclear in a manner that could hinder investors' rational investment decisions or cause significant misunderstanding among investors."
The FSS's correction demand is expected to delay Emart's move to bring Shinsegae Food under full ownership for the time being. Shinsegae Food had originally planned to complete the share exchange on June 8 after obtaining shareholder approval. The company must file an amended registration statement within three months; failure to do so will result in the related securities registration statement being deemed withdrawn.
Earlier, Emart had decided to conduct a comprehensive share exchange for approximately 1.04 million shares of Shinsegae Food. Emart sought to acquire all 1,042,112 shares (26.91%) — excluding Shinsegae Food's treasury shares and shares already held by Emart — by exchanging them for Emart shares at a ratio of 1:0.5031313, thereby making Shinsegae Food a wholly owned subsidiary. However, the process drew criticism that it could infringe on shareholder rights, following the failure of a voluntary delisting attempt through acquiring a 95% stake in Shinsegae Food and fierce pushback from minority shareholders.
