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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: peter michaelson who wrote (1889)	2/4/1998 9:32:00 AM
From: Mohan Marette	Read Replies (2) \| Respond to of 9980

Korea:Now it's ok to be 'hostile'. Peter and all: It is amazing what a 'little crisis' can do ! Hostile M&As Allows for Foreigners 02/04 18:11 * Late From This Month By Lee Chang-sup Staff Reporter From late this month, foreigners will be able to take over domestic companies, except for defense and strategic companies, through hostile mergers and acquisitions (M&As). The decision was made in a meeting Tuesday night between economic policymakers of the incoming and outgoing administrations, with the attendance of Rep. Kim Yong-hwan, chairman of the 24-member ''emergency economic committee'' for the new administration and Deputy Premier and Finance-Economy Minister Lim Chang-yuel. The plan got approval from President-elect Kim Dae-jung yesterday. They agreed to implement the action as soon as the National Assembly revises the law regarding foreign capital inducement at the current extraordinary session. When the law is revised, foreigners will no longer need approval from the Ministry of Finance and Economy when they buy any big local firm whose asset value is more than 2 trillion won. Foreigners will not need to get approval from the incumbent corporate management when they buy less than 33 percent of equities stakes in a domestic company, up from the current 10 percent. To help local firms protect managerial rights against unwanted foreign raiders, they will be able to buy back up to 33 percent of their equities in the stock market and 30 major conglomerates will also be free to increase investment in subsidiaries. A Western investment banker said Korea struck a compromise between two opposing views over the sensitive issue of allowing foreigners to take over domestic firms against the incumbent management's will. He said foreigners will not be given a unrestrained freedom to take over local firms through hostile M&A bids, as any non-Korean wishing to buy more than 33 percent of each company must get approval from the incumbent management. But foreigners can raid Korean firms through unfriendly M&As as long as the management controls less than one-third of equities, he noted. Foreigners will be unable to easily initiate costly takeover bids because domestic firms can also buy back up to 33 percent of their stocks in the stock market. Another preventative measure against hostile takeovers is the scrapping of the''tender offer bids'' _ a tool corporate raiders use to accumulate stocks from minor shareholders at a premium above market price, he and other brokers said. They predicted that once the law is revised at the National Assembly, foreigners might band together (conspire in the eyes of Koreans) to raid profitable blue-chip firms such as Samsung Electronics, Hyundai Motors and LG Telecom. Korean listed companies are no longer immune from unwanted outside attacks on their management, they noted. An American broker predicted that Korea will see an emergence of the''greenmail threat by foreigners against local firms'' aimed at selling stocks at huge premiums to incumbent management in return for forgoing hostile M&A bids. In a related development, policymakers decided to permit banks to invest up to 15 percent in other companies, up from the current 10 percent limit. Bank will be encouraged to engage in ''loan-for-equity'' deals with cash-short small- and medium-sized companies, meaning that banks can convert corporate loans into equity as part of the steps to help the companies resolve financial burdens. The new government also decided to penalize debt-ridden firms as it plans to reduce the amount of tax-deductible interest payments. Interest payments exceeding five times corporate capital will not be treated as expenses for tax deduction in 2000. The tax-deductible interest payment will be lowered to four times capital in 2001 and three times capital in 2003, it said. It also decided to provide tax incentives, including exemption of registration, value added and capital gains taxes, to firms when they merge, split or take over firms aimed at encouraging corporate restructuring. The consolidated financial statement will be mandatory for Korean firms from next year but no decision has been made yet whether chaebol will be obligated to hire outside auditors. To protect the rights of minor shareholders, the new administration decided to lower the share-ownership requirement from 1 percent to 0.5 percent for those seeking to file a collective lawsuit or demand the resignation of management or corporate executives. Anyone holding 0.3 percent, instead of the current 3 percent, of company shares can review corporate documents and financial statements. Highlight of Chaebol Policy Introduction of Limited Hostile Merger and Acquisition (M&A) Bids for Foreigners From This Month. Foreigners Can Buy About 80 Blue-chip Korean Companies With Asset Value Exceeding 2 Trillion Won. Chaebol Must Pay Penalties on ''Excessive'' Loans and Payment Guarantees. Chaebol Asked to Submit Consolidated Financial Statements From Next Year. *Minor Shareholders to Be Empowered to Check Arbitrary Corporate Management Through Collective Lawsuits or Reviewing Corporate Documents.