GABIA Special Committee Says “The Same 48,000 Won Does Not Mean the Same Transaction” ... ‘Neutral’ on Tender Offer [fn Market Watch]

[Financial News]  The formula that “the same price equals a fair transaction” has come under scrutiny in the tender offer for control of GABIA. Although the controlling shareholder and ordinary shareholders were offered the same price of 48,000 won per share, their economic interests may differ because the controlling shareholder will reinvest the sale proceeds and continue participating in management.
According to investment banking industry sources on the 10th, the GABIA Special Committee recommended that the board take a “neutral position” regarding the tender offer being conducted by DCK Investment. The committee consists of outside members with no conflicts of interest, while Shin & Kim LLC is serving as legal counsel.
The tender-offer price was set at 48,000 won per share, representing a premium of more than 40% over the market price before the announcement. However, the special committee focused less on the price than on the structure of the transaction after its completion.
For ordinary shareholders, accepting the tender offer ends their investment. The controlling shareholder, by contrast, will reinvest with the tender-offer proceeds after taxes and expenses are deducted. The shareholder can benefit from any future increase in the company’s value and continue participating in management. This is why the committee described the controlling shareholder as a “seller and reinvestor.”
The committee therefore concluded that, unlike ordinary shareholders, the controlling shareholder may have less incentive to maximize the immediate sale price. A higher price would increase the burden of acquisition financing, while the controlling shareholder could participate in any future increase in the value of the reinvested stake. However, the committee did not conclude that the price had been intentionally set low because of the reinvestment.
Despite the premium of more than 40%, the committee deferred judgment on whether the price was appropriate. Because there was no separate independent valuation or fairness opinion, it was difficult to determine whether the price sufficiently reflected GABIA’s standalone value. The committee said that “the price at which a tender offer can succeed” must be distinguished from “a price that is fair to ordinary shareholders.”
The committee found no clear illegality in the transaction process itself. Ultimately, rather than recommending approval or rejection, it advised the board to remain “neutral” and urged it to transparently explain to the market the controlling shareholder’s reinvestment and continued management participation, as well as the differences in interests between the controlling shareholder and ordinary shareholders.
An investment banking industry official noted, “The key issue in this case is not the 40% premium but the structure in which the controlling shareholder remains an investor even after the sale,” adding, “In delisting-oriented tender offers, reinvestment structures and independent valuations could emerge as new issues in assessing price fairness.” 


[email protected] Kim Kyung-ah Reporter