The owner family of SHINSUNG TONGSANG, which operates domestic clothing brands 'Topten' and 'Giozia', is set to embark on a public purchase for voluntary delisting. Given the ongoing conflicts with minority shareholders and shareholder returns, market attention is focused on the results of this public purchase. The investment community interprets that SHINSUNG TONGSANG is seeking to complete the delisting process centered around the only son before the implementation of the revised Commercial Law.
According to the Financial Supervisory Service's electronic disclosure system (DART) on the 9th, Canaan Corporation and Aisong Fashion, the top two shareholders of SHINSUNG TONGSANG, plan to publicly purchase 23,178,102 shares of SHINSUNG TONGSANG. The purchase price is set at 4,100 won per share, and the purchase period is from this day until July 9.
Following the public purchase news, SHINSUNG TONGSANG's stock price rose by 29.97% compared to the previous trading day, setting a new one-year high. Although the purpose of the public purchase is 'delisting', when the market price is generally lower than the public purchase price, the stock price tends to approach the public purchase price, concentrating buying interest.
Previously, SHINSUNG TONGSANG launched a public purchase aimed at delisting in June last year, but the public purchase price (2,300 won) faced backlash from individual investors who deemed it too low. Ultimately, the public purchase only managed to secure an additional 5.89% in equity. As a result, the owner's family's equity stake increased from 77.98% to 83.88%, but it fell short of the 95% requirement for delisting.
The current public purchase price (4,100 won) is 35.8% higher than the previous trading day's closing price (3,020 won). However, the response from existing shareholders remains unfavorable. This is due to the past incident where former Chairman Yeom Tae-soon of SHINSUNG TONGSANG gifted each of his three daughters 4% equity. At that time, Chairman Yeom gifted shares at 2,645 won per share, and after the company's performance surged within three months, he immediately repurchased 100 shares each through the family company Canaan at 4,920 won per share.
Thanks to this, it is estimated that the three daughters gained profits of about 2.2 billion won each. Minority shareholders have raised complaints, saying, "In the end, it's like the family company Canaan is gifting cash to the children," and that "the owner family buys back shares at 4,920 won while trying to purchase common stocks at a bargain price." Some minority shareholders have indicated their intention to 'hold out,' saying the public purchase price is low.
However, SHINSUNG TONGSANG's attempt for voluntary delisting is expected to proceed without significant difficulties. Even if it fails to secure a 95% equity stake through the public purchase, the owner family, which holds more than 80% of equity, can realize the delisting through a comprehensive stock exchange.
A comprehensive stock exchange refers to the process where the largest shareholder, holding more than two-thirds of the equity, exchanges the equity of other shareholders for shares of the parent company or cash.
The industry interprets that SHINSUNG TONGSANG is hastily proceeding with the delisting process in light of the Commercial Law amendment.
An insider from the acquisition finance industry noted, "The currently debated Commercial Law amendment in the National Assembly contains provisions to strengthen the rights of minority shareholders and cumulative voting, making it likely that the planned delisting schedule has been expedited," and added, "Once the policy changes, it may become more complicated for large shareholders to streamline minority shareholder equity through public purchases or comprehensive stock exchanges."
The entities behind the public purchase, Canaan and Aisong Fashion, are closely linked to Mr. Yeom Sang-won, the only son of Chairman Yeom. Currently, Canaan, the largest shareholder of SHINSUNG TONGSANG (with a 45.63% stake), is a personal company held by Mr. Yeom Sang-won, who owns 82.43% of the equity. Aisong Fashion also has a 46.5% equity stake by Canaan and plays a significant role in the succession process.
Additionally, the increasing pressure to expand dividends under the new government's shareholder return policy acts as a burden. As of the end of March this year, SHINSUNG TONGSANG's undistributed retained earnings amount to 372.6 billion won. This fund, which has been accumulated without much dividend distribution, is likely to be used as a resource for dividends to minority shareholders if it remains a publicly listed company in the future, depending on government policy direction.
Meanwhile, SHINSUNG TONGSANG maintained a no-dividend policy for 10 years before implementing a surprise dividend of 50 won per share in 2023. However, the dividend payout ratio is only 8.6% of its net income. In contrast, the dividend payout ratio of Canaan, a family-owned non-listed company and the largest shareholder, is 49%, highlighting a markedly low level.