President Lee Jae Myung: “Even if I get criticized, we must revitalize M&A”… Puts more weight on partially allowing mandatory tender offers than on 100% - 경향신문

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President Lee Jae Myung speaks at a capital market policy roundtable held in Yeouido, Yeongdeungpo-gu, Seoul, on the 13th. Cheong Wa Dae Photo Press Corps

On the 13th, regarding the overhaul of the mandatory tender offer system, President Lee Jae Myung said, “Even if I get criticized, I am closer to the view that we should expand the pie, revitalize M&A (mergers and acquisitions), and normalize the entire market so that all shareholders benefit.” As the introduction of the mandatory tender offer system is debated, the principle of ‘100% all-shares purchase’ to protect minority shareholders is clashing with the ‘50%+1 share’ method aimed at energizing the M&A market. President Lee appears to be leaning toward a plan that mandates buying a portion of shares rather than 100%.

At a capital market policy roundtable held at the Korea Exchange in Yeouido, Seoul, President Lee said, “How to improve the mandatory tender offer system is now under debate, and we must consider at the same time the market’s needs, the issue of giving opportunities to minority shareholders, and the possibility that it could become an obstacle that in effect blocks M&A.” He added, “That said, I cannot do as I please, and the party needs to continue discussing it,” and “I hope it will not be delayed too long.”

The mandatory tender offer system legally guarantees ordinary minority shareholders the opportunity to sell their shares at a price reflecting the so-called control premium when the largest shareholder of a listed company changes. The ruling and opposition parties agreed to introduce this system by revising the Capital Markets Act during this year’s regular session of the National Assembly.

Accordingly, in September the National Policy Committee of the National Assembly passed a bill to revise the Capital Markets Act requiring an acquirer who obtains at least a 25% stake and becomes the largest shareholder during a control acquisition to purchase up to 50%+1 share of the total shares. However, due to opposition from minority shareholders, a plenary vote in the National Assembly has been put on hold. Minority shareholders argued that the 50%+1 share method is designed to purchase the controlling shareholder stake in full first, thereby failing to guarantee ordinary shareholders an equal opportunity to sell.

In response to minority shareholders’ call for a 100% tender offer, President Lee said, “It is ideal and good,” but added, “If the funding burden on acquirers grows and M&A itself cannot proceed, would that not deprive minority shareholders of the opportunity altogether?” He continued, “If we force a 100% purchase to carry out an M&A, the amount of funds that must be mobilized becomes large, which makes M&A more difficult, does it not?”

Addressing YouTube viewers on site, President Lee said, “Let us try a quick poll: press 1 for 100%, press 2 for 50% or more.” When Ahn Gwi-ryeong, the deputy spokesperson of Cheong Wa Dae who was moderating, reported that more respondents chose 100%, President Lee replied, “That seems to be the case from the viewpoint of minority shareholders.” He added, “We will narrow the differences as much as possible, but in the end we will make a decision and take the heat from both sides,” and “That is how things get done.”

Regarding the recent KOSPI correction phase, President Lee said, “Our government’s resolve and policies for capital market reform have once again been put to the test,” and “There is no doubt that normalizing the capital market is our government’s firm policy direction.” He said, “The core keyword of the capital market is trust,” adding, “The core problem is mistrust that companies treat shareholders not as owners to be respected but as targets to be used, and that controlling shareholders may abuse control rights.”

In particular, he said, “Whether our companies are truly respecting shareholders has become a hot topic these days,” adding, “Many firms are still valued below book, and there are suspicions that they manage valuations low to pay less tax when inheriting.” He was referring to issues related to the so-called ‘anti-stock-price-suppression law’. Citing abuses of control by controlling shareholders and stock price manipulation, he said, “We have also issued a separate instruction to the Serious Crimes Investigation Agency (Jungdae Crime Investigation Agency) to strictly crack down on unfair practices in financial markets.”

President Lee also ordered the creation of a high-level public-private joint body dedicated to capital market reform. He said, “I think I made a mistake last year,” adding, “We should, of course, have created a dedicated reform body and pushed hard, but I let my guard down because it seemed to be going well too easily.”

President Lee visited the exchange wearing a red tie, a color associated with rising stock prices. He said, “Most of you are wearing red ties, so I matched with red as well,” adding, “I will start the meeting hoping our stock market will trend upward.”

It was his first visit to the Korea Exchange in about one year and five months. On June 11 last year, a week after taking office, he visited the exchange for his first external schedule and expressed his commitment to tough punishment for unfair stock trading and to invigorating dividends.