Gabia corporate identity logo [Gabia website]
Gabia corporate identity logo [Gabia website]

Gabia, a cloud and IT infrastructure company, has launched a delisting process to resolve its dual-listing structure — marking a novel approach to taking a parent company private — but activist funds are pushing back over the tender offer's price and procedures.

According to investment banking industry sources, Gabia has teamed up with Macquarie Asset Management to conduct a tender offer for Gabia shares at 48,000 won ($32) per share, running from Tuesday through Sept. 17. Under the deal structure, Macquarie will acquire a 24.4 percent stake held by Gabia co-CEO Kim Hong-guk and related parties, then purchase shares from general shareholders at the same price.

Gabia and Macquarie said the purpose of the tender offer is to "resolve the dual-listing structure and simplify the listing framework." Gabia has several Kosdaq-listed affiliates, including KINX, which operates an internet data center business, as well as SPSoft and Axgate. The company also holds a number of unlisted subsidiaries, including Gabia CNS, Nolmeong Swimeong and Whois.

Investment banking industry insiders are calling this the first case in which a dual-listing structure is resolved by delisting the parent company rather than the subsidiary. While delisting or merging a subsidiary is the more commonly discussed approach, Gabia chose a different path. As a holding company already trading at a discount due to its multiple listed subsidiaries, the cost of the tender offer is relatively low — and the move also leaves open the possibility of future initial public offerings by other affiliates.

"Mid-sized companies and Kosdaq-listed firms had in fact been reviewing this kind of deal structure even before any guidelines were announced," an investment banking industry official said. "Since financial regulators place significant weight on procedural legitimacy — specifically whether minority shareholders were sufficiently persuaded during the delisting process — the tender offer price and the decision-making process will be the central issues."

How the market assesses the deal is another point of interest, particularly as minority shareholder rights continue to strengthen. Existing activist investors, including Align Partners and Miri Capital, have raised objections to both the price and the process surrounding Gabia's delisting attempt.

Align Partners, which holds a 14.3 percent stake in Gabia, issued a statement on Monday — the same day the tender offer was announced — calling for an official response from Gabia's board by July 31. The firm called for a search for potential acquirers who could offer more favorable terms, verification of the fairness of the tender offer price, the establishment of an independent special committee, and an explanation of the information-sharing process with the buyer and any conflicts of interest involved.

The concern stems from the structure of the deal: although Macquarie is conducting the tender offer for all publicly traded shares, CEO Kim and others plan to reinvest their sale proceeds and co-manage the company with Macquarie going forward. Align Partners said the transaction "is effectively a take-private deal driven by the controlling shareholder, raising serious concerns about structural conflicts of interest," and called for "stricter procedures to protect the interests of general shareholders than would be required in a typical third-party merger or acquisition."

US-based investment firm Miri Capital Management also released an open letter that day. Miri Capital holds a 24.2 percent stake in Gabia and more than 15 percent in KINX. The firm was more direct in its criticism, saying the tender offer price was far too low. Miri Capital said the tender offer price "significantly undervalues Gabia" and argued that "based on transaction multiples of comparable global companies, the share price should be at least 66,200 won."

"Minority shareholder opposition is the biggest variable in any delisting," another investment industry official said. "Retail shareholders are usually hard to organize, but in this case activist investors hold a substantial stake. The outcome of the tender offer and the subsequent negotiation process could unfold very differently from previous delisting cases."


park.jiyeong@heraldcorp.com