[EXPLAINER] Why Korea's mandatory tender offer plan is drawing global scrutiny
The proposed revival of Korea's mandatory tender offer system, abolished in 1998 following the Asian financial crisis, has reignited debate nearly three decades later. The idea behind the system is simple: When someone buys a company, smaller shareholders should have a chance to sell their shares at the same price as the company's largest shareholder. Under the bill pending in the National…
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The proposed reinstatement of Korea's mandatory tender offer system, halted in 1998 after the Asian financial crisis, has sparked renewed international debate. This system aims to safeguard the interests of smaller shareholders by enabling them to sell their shares at the same price as the company's largest shareholder.
Under the legislation currently under consideration in South Korea's National Assembly, a company seeking to gain control would be required to purchase shares via a public tender offer, elevating its stake to a minimum of 50 percent plus one share. The primary objective is to protect minority shareholders, especially retail investors, from being disadvantaged in corporate acquisitions.
To illustrate, consider Company A intending to acquire Company B. Company B's dominant shareholder, Kim, holds 40 percent of its shares, while the remaining 60 percent is distributed among smaller shareholders. Company A proposes to purchase Kim's entire shareholding at a premium above the prevailing market price. Upon acquiring Kim's 40 percent stake, Company A would then own full control of Company B.
Written by urgent.news from The Korea Times's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
