FSS correction order prompts improved terms for minority shareholders

Exchange ratio and exchange price unchanged; disclosures significantly expanded

The headquarters of Woori Financial Group in Jung-gu, Seoul. [Woori Financial]
The headquarters of Woori Financial Group in Jung-gu, Seoul. [Woori Financial]

Woori Financial Group and Tongyang Life Insurance have raised by 10 percent the share appraisal rights price available to shareholders who oppose their planned comprehensive share swap.

According to an amended securities registration statement filed with the Financial Supervisory Service's DART system Thursday, Woori Financial raised the planned appraisal rights purchase price from 8,505 won to 9,356 won, a 10 percent increase. The exchange ratio — 0.2521056 Tongyang Life shares per one Woori Financial share — and Tongyang Life's exchange price of 8,720 won were left unchanged.

The share swap is intended to make Tongyang Life a wholly owned subsidiary of Woori Financial. Through the comprehensive share exchange, which converts Tongyang Life shares into Woori Financial shares, the remaining minority stake of about 19.6 percent would be absorbed, after which Tongyang Life would be delisted.

Minority shareholders had pushed back, arguing that the company's value was being underestimated, after the exchange price offered to them — 8,720 won per share — came in roughly 17 percent below the 10,562 won ($7) per share Woori Financial paid when it acquired the stake from the former majority shareholder, China's Dajia Insurance. The FSS ultimately ordered a correction in May, directing the company to explain the basis for its price calculation in a way that investors could understand.

The revised appraisal rights price is what dissenting shareholders receive when they sell their shares back to the company for cash. The original price of 8,505 won was derived from a formula set under the Capital Markets Act — a weighted average of market prices immediately before the board resolution — but it was lower than the exchange price of 8,720 won, fueling further discontent among minority shareholders.

Woori Financial and Tongyang Life said they set the 10 percent increase based on the maximum premium permitted under capital markets regulations for intra-group transactions. The companies said they had considered raising the price to the level of the former majority shareholder's acquisition price of 10,562 won per share, but concluded that figure reflected a control premium and was therefore inappropriate as a benchmark for dissenting shareholders. They added that applying it would raise equity concerns among shareholders and place a significant burden on the insurer's financial soundness.

In the amended disclosure, Woori Financial and Tongyang Life substantially expanded their explanations covering the basis for the exchange price calculation, the composition and authority of the special committee and the substance of its deliberations at each meeting, the review basis provided by external accounting and legal advisers, the difference between the price paid to the former majority shareholder and the exchange price offered to minority shareholders, and the timing of treasury share cancellations.

The extraordinary general meeting of shareholders is expected to proceed as scheduled on July 24. The amended registration statement is expected to complete the FSS acceptance process within seven business days of submission. The share exchange is set for Aug. 11, with delisting scheduled for the end of August.


psj@heraldcorp.com