Gabia Tender Offer Falls Through... Align Shifts from Delisting Battle to 'Board Restructuring Battle' [fn Market Watch]

[Financial News]  Gabia's tender offer for a voluntary delisting has effectively fallen through, bringing conflicts of interest between the controlling shareholder and general shareholders to the fore. The transaction was structured on the premise that the controlling shareholder's stake would be acquired, but it failed to draw sufficient participation from the shareholders targeted by the tender offer. Align Partners Asset Management views the case as a precedent that could influence the pricing and procedures of future voluntary-delisting transactions.
According to investment banking industry sources on the 18th, Align Partners Asset Management said of the results of the Gabia tender offer, "This is an unusual case that shows the controlling shareholder's consent alone cannot guarantee the completion of a transaction," adding, "It confirms the importance of fair terms that general shareholders can accept."
Only about 5.4% of Gabia's total shares outstanding, or approximately 7.4% of the shares targeted by the tender offer, were submitted. The failure to secure the required number of shares also put the voluntary delisting on hold.
Align Partners Asset Management's main concern is not only the price but also the transaction structure. While the existing management can maintain its participation in the business and the opportunity to benefit from a future increase in corporate value through reinvestment, general shareholders who accept the tender offer receive cash and end their investment relationship with the company.
The special committee also determined that the controlling shareholder and general shareholders had different economic interests and that, in the absence of an independent valuation of the company, there were limits to assessing the fairness of the price. It therefore recommended that the board take a 'neutral' position.
Align Partners Asset Management argued, "The greater the conflict of interest in a transaction, the more the board must secure the best possible terms for general shareholders through independent valuation and negotiations," adding that such efforts were insufficient during the tender offer process.
Following the collapse of the tender offer, the focus has shifted to the composition of the board. Align Partners Asset Management has requested the convening of an extraordinary general meeting of shareholders and proposed the appointment of two independent directors and one other nonexecutive director.
Gabia's cross-listing structure also remains an issue. Align Partners Asset Management maintains that if the company pursues a voluntary delisting again, it must offer better terms than before while also taking into account the interests of general shareholders of listed subsidiaries and second-tier subsidiaries, including KINX.
An investment banking industry source said, "This case confirms that a price agreed upon by the controlling shareholder and the acquirer is not automatically accepted by general shareholders," adding, "In future voluntary-delisting transactions, not only the price but also the process for determining it and the board's independence could become important." 
[email protected] Reporter Kim Kyung-a Reporter