Test of Strength
Controversy over a possible hostile M&A of Ildong Pharmaceutical Co. by Green Cross has reignited after just a year.
According to the two companies on Feb. 9, Green Cross, which is the second-largest shareholder of Ildong, sent a shareholder proposal to Ildong Pharmaceutical on Feb. 6, asking Ildong management to appoint two people that it recommended as its board members in the next shareholder's meeting.
Three of the 10 board members in Ildong, including its Chairman Lee Jung-chi, end their terms next month, and Green Cross demanded that Ildong grant it rights to appoint an auditor and an outside director.
An official from Green Cross said, “This is a reasonable request as the shareholder. We have no plans to push for a hostile M&A.”
However, an Ildong Pharmaceutical representative refuted this statement on the same day, saying, “Green Cross claims to support cooperation and mutual development. However, it opposed turning Ildong into a holding company last year. This time, Green Cross is exercising its rights, including the shareholder proposal without any notice, and the current circumstance will inevitably be interpreted as a hostile M&A.”
The two companies are highly likely to compete to win over votes for the appointment of the board members at the next shareholder's meeting.
Green Cross increased its shares of Ildong Pharmaceutical to 15.35 percent in 2012, becoming its second-largest shareholder. It bought additional stock in Ildong in January last year, increasing its shares to 29.36 percent. The largest shareholder holds 32.5 percent, only 3 percent more than Green Cross. Also, the company changed the purpose of shareholding and said, “Corresponding to the management objective of the company, relevant decisions will be made.”
Earlier, Green Cross voted for opposition on the split-off of Ildong, along with an institutional investor, Fidelity, in the extraordinary general meeting of Ildong Pharmaceutical held in January last year. And it defeated Ildong’s attempt to establish its subsidiary to stabilize the management.
The sales of Green Cross last year amounted to 975.3 billion won (US$890.28 million). Ildong Pharmaceutical did not announce its performance last year, and the sales of the company in 2013 totaled 395.2 billion won (US$360.75 million). If the two companies merge, the sales will reach 1.4 trillion won (US$1.28 billion), becoming the number one company in the industry.