“Give shareholders their share of the 250 billion won” ... U.S.-based Terton Capital puts the brakes on Golfzon Holdings’ opposition to the sale [fn Market Watch]

[Financial News] A minority shareholder has joined the dispute between Golfzon Holdings and MBK Partners over the sale of Golfzon County. U.S.-based investment firm Terton Capital is calling on Golfzon Holdings to accept the sale and return to shareholders the proceeds from the stake sale, estimated at around 250 billion won. The dispute over the sale appears to be widening into a clash of interests between controlling and minority shareholders.
According to investment banking industry sources on the 5th, Terton Capital, which holds about a 3% stake in Golfzon Holdings, released a presentation prepared for the board that day, calling for the company to withdraw its legal action over the Golfzon County sale and return value to shareholders. It also demanded an official response by the 10th.
The key issue is how the approximately 250 billion won in sale proceeds will be used. On the 27th of last month, MBK Partners signed an agreement to sell its 100% stake in Golfzon County to a consortium of The Siena Group and CL Asset Management at an enterprise value of approximately 1.8 trillion won. Terton estimated that, once the deal is completed, Golfzon Holdings would receive about 250 billion won after tax, or approximately 6,500 won per share. That is close to the tender offer price of 6,700 won per share offered by SJ Investment Holdings (SJ), founded by Kim Won-il, Golfzon Holdings’ largest shareholder and former CEO.
Terton argued that the board should use the funds to enhance shareholder value rather than block the sale. It proposed either making a tender offer for the remaining minority shareholders’ stakes at fair value or distributing the sale proceeds as a dividend.
Terton estimated that buying out all the remaining minority shareholders’ stakes at the book value of 19,310 won per share would cost about 111 billion won, or 44% of the expected sale proceeds. As an alternative, it also called for a dividend of about 6,500 won per share and the cancellation of 9.83% of the company’s treasury shares.
Whether sufficient information about the Golfzon County sale was provided at the time of the tender offer is also at issue. When SJ launched its tender offer this past June, MBK was already proceeding with the sale of Golfzon County.
Terton argued that the tender offer filing did not adequately reflect the drag-along right and key information about the sale. Since Golfzon Holdings’ participation in the bidding for the acquisition later became known, Terton says the board should disclose when it learned of the information and how it reached its decisions.
Terton also questioned the independence of the advice, noting that Samjong KPMG, which served as financial adviser to the special committee, reportedly also advised MBK on the sale.
Golfzon Holdings had previously said it could not agree to the sale of Golfzon County and threatened legal action. Terton expressed concern that such action could delay the receipt of the sale proceeds and undermine shareholder value.
Terton Capital CEO Ryan Albert questioned the propriety of the board’s decisions, saying, “The amended Commercial Act requires directors to perform their duties for the company and all its shareholders and to treat shareholders fairly.”
Terton said that if it receives no response by the 10th, it plans to supplement its petition to the Financial Supervisory Service and exercise its shareholder rights at next year’s annual general meeting.
Meanwhile, investment banking industry sources say the focus of the dispute is shifting from the sale itself to who receives the proceeds and how they are used.
One industry source said, “How convincingly Golfzon Holdings can explain the economic benefits of opposing the sale will be a key factor in future shareholder disputes.” 

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