SOUTH KOREA Trends and Developments Contributed by: Ho Joon Moon, Tae Jung Kim, Do Kyeom Kim and Ji Geon Park, Lee & Ko
requiring clearer justification that such transac - tions serve not only the interests of the con - trolling shareholder but also those of the entire shareholder base. Mandatory Tender Offer Regime On 21 December 2022, the Financial Services Commission (FSC) announced its plan to intro - duce a mandatory tender offer regime aimed at enhancing the rights of minority shareholders in cases of change of control through transfer of shares. In 2023, several bills – including the proposed amendment to the FSCMA reflecting this regime – were introduced at the National Assembly. Under the FSC’s proposal, a person intending to acquire 25% or more of a listed company’s shares and thereby becoming a controlling shareholder would be required to purchase an additional “50% plus one share” through a man - datory tender offer with minority shareholders at the same price paid for such controlling stake. Meanwhile, some legislative proposals submit - ted by members of the National Assembly go further, calling for the acquirer to purchase 100% of the remaining shares through the tender offer. While it is difficult to predict the details of the mandatory tender offer regime to be introduced and the timing of adoption, the public opinion highly supports the introduction efforts. Further, there are already numerous analyses in aca - demia relating to the adoption of the mandatory tender offer regime as well. Therefore, it appears likely that the regime itself will be adopted at some point, but the details of the regime to be actually adopted are still unclear.
Considering the current status of the Korean M&A market, where most transactions are con - ducted as some form of share transfer, the intro - duction of the mandatory tender offer regime will bring material changes to M&A practice in Korea. For purchasers, the cost of M&A transac - tions will increase substantially, since they would be required to secure the majority of the target shares. For sellers, engaging in M&A will be less appealing, as they will be splitting the premiums attached to controlling stakes with other minor - ity shareholders. At the same time, the manda - tory tender offer will afford certain companies a defensive stance in hostile takeover attempts. It will therefore be important to closely follow details of the regime to be adopted, including price and threshold of shares, and to plan any potential M&A deals with consideration towards timing.
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