DB HiTek pushes split-off despite shareholder opposition

DB HiTek's chip plant in Bucheon, Gyeonggi [DB HITEK]

DB HiTek, a Kopsi-listed chip company, is pushing to split off its semiconductor designing business, reversing its previous stance.

The Bucheon, Gyeonggi-based company recently said in a regulatory filing that its board of directors agreed to put forward a proposal to separate its fabless business as a subsidiary at a shareholder meeting slated for Mar. 29.

Tentatively named DB Fabless, the split-off will be 100 percent owned by its parent company DB HiTek.

The remaining company will focus on contract manufacturing, or the so-called foundry business.

DB HiTek said in a release that splitting off the design business aims to “strengthen its foundry business” by “resolving the conflict-of-interest issue with customers,” as the company has been juggling both its chip designing and contract manufacturing businesses.

DB HiTeck hopes to imitate Taiwanese TSMC’s business model as a pure-play foundry — a chip manufacturer without in-house design capabilities — by separating the fabless division.

“If the new split-off is consolidated as a wholly owned subsidiary, the equity contribution from the new company will continue to be included in the remaining company’s financial performance, and therefore there will be no revenue decline caused by the split-off,” said DB HiTek.

It is the company’s second attempt at the split-off.

In September last year, DB HiTek called off its plan to separate the chip design division due to strong opposition from its shareholders citing damage to shareholder value that would be caused by the possible split-off and public listing of a promising business sector.

In order to win the small shareholders’ vote in the shareholder meeting, DB HiTek promised not to list the new fabless subsidiary for the next five years after the separation.

In the case of LG Chem, which split off its battery subsidiary LG Energy Solution, the parent company’s share prices plunged as LG Energy Solution went public on the Kospi bourse last year.

As public opinion has been turning against split-offs following similar cases including SK Innovation’s split-off of SK On, a new rule was enacted last year to protect the shareholders’ rights.

The newly enacted rule allows shareholders to sell their shares to the company before the split-off at a set price.

However, small shareholders are once again opposing the split-off, according to local media reports.

An online forum of DB HiTek shareholders established last year plans to take collective action in opposition to the separation in the shareholder meeting.

DB HiTek is 12.42 percent owned by DB Inc., its largest shareholder, and 8.34 percent by the National Pension Service. Small shareholders accounted for some 75 percent of the ownership as of September last year.

If the split-off is approved in the shareholder meeting, the new company will be incorporated in May.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]