Help for hostile takeoversThe Financial Supervisory Service says it will consider introducing systems to help local companies defend themselves from hostile takeover attempts. The financial watchdog’s move seems to be somewhat late, because more than a few companies already are under the threat of hostile takeover by foreign investors. But even the belated move faces an obstacle. The deputy prime minister for finance and economy has expressed opposition to the plan. He said yesterday, “It is not desirable to tighten regulations on mergers and acquisitions.” The deputy prime minister, who had desperately defended the regulations on plant expansion in the Seoul metropolitan area, now says the systems for defense against hostile takeovers are not good because they are new regulations. It is ridiculous that one government voices two opinions. It seems that the government does not realize what a serious situation local companies are in.
According to the Federation of Korean Industries, 17 of the nation’s top 30 companies, based on the aggregate value of the listed shares, now have foreign shareholders holding more than a half of their outstanding shares. The 17 companies include Samsung Electronics Co., Posco, Kookmin Bank and SK Telecom Co., which are Korea’s representative companies. Actually, foreign investors are making attacks. The chief executive officer of Posco recently said he can’t sleep nowadays due to concerns about a hostile takeover. Of course, mergers and acquisitions are part of economic life and a free market. It is not proper to block takeovers by foreign investors. But the government should also allow companies a minimum level of defense.
The United States established the Exon-Florio provision in 1988 to prevent industries related to national security, such as energy and telecommunications, from being taken over by foreigners. And 94 percent of the 500 biggest U.S. companies are using various defense tools. European countries are now designing such defense tools. And in Japan, who has a similar business law structure to Korea, 350 listed companies have introduced poison pills and other defensive tools.
Local companies now have few defensive tools except for buyback of their shares. Accordingly, listed companies have poured 42 trillion won ($46 billion) into buying back their own shares, instead of spending the money on technology development and new facilities. Now, in the global market, hostile takeover attempts are stronger than ever. The government should help companies emerge from concerns about such attacks.