Korean Corporate Governance Forum’s Public Inquiries
Public inquiries on revised regulatory filing detailing spin-off and
merger of three Doosan companies
KCGF makes public inquiries from the minority shareholder’s perspective regarding the amended registration statement filed to the FSS on August 6th, 2024, pertaining to the corporate restructuring involving the spin-off, merger, and equity swap of three Doosan companies.
Note: The following inquiries have been designed to assess whether the board of directors of Doosan Bobcat, Doosan Enerbility and Doosan Robotics has engaged in a substantive deliberation of the matters addressed in the revised securities registration statement to the FSS, in accordance with the general corporate governance procedures. These are questions that any minority shareholders might have and also seek to verify that all shareholders have been provided with sufficient information to make informed investment decisions.
[To all three companies regarding standard decision-making process]
1. To what extent did the directors of each company fulfill their fiduciary duties – both duty of loyalty and duty of care - by conducting a comprehensive analysis of the proposed capital transactions including pros and cons, with a particular focus on the interests of the minority shareholders? Specifically, when was the board first made aware of the transactions, and how much time was dedicated to its discussion? Did the board hire any independent third-party advisors, such as domestic or foreign investment banks or consulting firms?
2. Given the widespread practice among listed companies of preparing corporate value enhancement plans, or "Value-up disclosures," in the second half of the year, it is reasonable to assume that the management of the three Doosan companies has either presented or is in the process of presenting such plans to their respective boards in July and August. In light of the substantial financial losses that the National Pension Service (NPS) and minority shareholders are likely to incur due to the recent sharp decline in share prices, has the board discussed the connection between these Value-up disclosure plans and the proposed transactions? In other words, why the board did not announce its own Value-up program prior to these transactions?
3. Many global bluechips, including Apple and Microsoft, have established a practice of making available, on their websites, recordings of conference calls held with investors. This transparency and fairness in shareholder communications have become a global standard for listed companies. Given this precedent, we would like to inquire whether the company plans to release recordings of the conference calls with foreign investors that were reportedly conducted promptly following the announcement of the transaction involving the three companies.
[To the CEO and members of the Board of Directors of Doosan Enerbility]
4. Doosan Enerbility alleges that the spin-off and merger was driven, in part, by the company's need to strengthen its financial position to fund investments in new technologies and expand its production capacity to meet growing market demand:
4.1 There will be a cash inflow of W500 billion from the sale of non-core assets like Doosan Cubex. Questions are being raised whether there is any relation to the spin-off and merger. Couldn't the company have secured the same amount by selling these assets even without going through the spin- off and merger transaction?
4.2 The disclosure states that the transfer of W700 billion in debt related to the investment business division will facilitate new investment opportunities. Can you provide more details on the specific types of investments the company plans to pursue with this additional financial flexibility?
4.3 The plan involves transferring W700 billion in debt from the investment business division. However, we would like to inquire whether selling the Doosan Bobcat stake and securing cash proceeds would be a more effective strategy for enhancing the company's ability to invest in its core business. This question is independent of the comparison with the share distribution discussed in question 5.
5. There has been a claim that the proposed share distribution arrangement, whereby Doosan Enerbility shareholders will receive Doosan Robotics shares, which holds an equity interest in Doosan Bobcat, is less beneficial to shareholders than a sale of Doosan Bobcat stake.
5.1 What specific assumptions were made about the potential cash inflow from a sale of the Doosan Bobcat stake when comparing the two scenarios?
5.2 The claim that a sale of the Doosan Bobcat stake is less favorable to shareholders, as the sale proceeds are not distributed directly, seems to overlook the potential advantages of reinvesting these funds to enhance the growth prospects. However, doesn't this argument fail to consider the potential benefits of using the sale proceeds for new investments and the positive impact on the share price due to the increase in corporate value of Doosan Enerbility?
5.3 The company has represented that Doosan Enerbility shareholders will have the opportunity to directly participate in the future growth of both Doosan Robotics and Doosan Bobcat. However, we request that the company provide a detailed explanation for its conclusion that the potential for increased shareholder value is greater under a scenario where Doosan Bobcat remains a subsidiary of Doosan Robotics, as opposed to a scenario where Doosan Bobcat is sold and the proceeds are reinvested in the core business.
[To the CEO and the members of Board of Directors of Doosan Bobcat]
6. In regards to the business synergies that Doosan Bobcast management claims behind the equity swap with Doosan Robotics:
6.1 Doosan Robotics has mentioned that it will utilize Doosan Bobcat's extensive network in North America and Europe to increase customer reach, enhance distribution channel management, and tap into existing financing programs. Please provide more details on how this collaboration will work in practice? Furthermore, are there any potential drawbacks or challenges that Doosan Bobcat might face as a result of sharing its network with Doosan Robotics?
6.2 Doosan Robotics has announced that it will provide automation and robotization solutions and services to Doosan Bobcat and utilize Doosan Bobcat's facilities as a testing ground for new technologies. Please elaborate on the specific types of solutions and services that Doosan Robotics plans to offer to Doosan Bobcat, and what competitive advantages these solutions will provide compared to existing options in the market?
6.3 Given the potential for significant sales growth in the manufacturing and logistics market through the cross-selling of Doosan Robotics' products with Doosan Bobcat's forklifts, please provide a breakdown of the specific products that will be cross-sold and projections for the increase in sales 6 months, 1 year, and 2 years post-merger?
6.4 By combining Doosan Robotics' expertise in collaborative robots for professional services with Doosan Bobcat's global reach in construction, logistics, and agriculture, the latter aims to enter and dominate the professional services robot market. Please elaborate on the specific segment of the professional services robot market that the company is targeting and provide a forecast for the expected sales growth in this segment.
6.5 Doosan Robotics has highlighted its strengths in robotization software and manipulator technology. To better understand the company's competitive positioning, has a benchmarking study been conducted against key competitors in the collaborative robot market? If so, could the company share the key findings of this study, including a comparison of the company's technology capabilities, software features, and overall product performance?
August 12th, 2024
Korean Corporate Governance Forum
Chairman, Namuh Rhee & Vice Chairman, Joonbum Cheon
Note: Please note that original document in Korean was distributed on August 9th, 2024.
Korean Corporate Governance Forum’s Public Inquiries
Public inquiries on revised regulatory filing detailing spin-off and
merger of three Doosan companies
KCGF makes public inquiries from the minority shareholder’s perspective regarding the amended registration statement filed to the FSS on August 6th, 2024, pertaining to the corporate restructuring involving the spin-off, merger, and equity swap of three Doosan companies.
Note: The following inquiries have been designed to assess whether the board of directors of Doosan Bobcat, Doosan Enerbility and Doosan Robotics has engaged in a substantive deliberation of the matters addressed in the revised securities registration statement to the FSS, in accordance with the general corporate governance procedures. These are questions that any minority shareholders might have and also seek to verify that all shareholders have been provided with sufficient information to make informed investment decisions.
[To all three companies regarding standard decision-making process]
1. To what extent did the directors of each company fulfill their fiduciary duties – both duty of loyalty and duty of care - by conducting a comprehensive analysis of the proposed capital transactions including pros and cons, with a particular focus on the interests of the minority shareholders? Specifically, when was the board first made aware of the transactions, and how much time was dedicated to its discussion? Did the board hire any independent third-party advisors, such as domestic or foreign investment banks or consulting firms?
2. Given the widespread practice among listed companies of preparing corporate value enhancement plans, or "Value-up disclosures," in the second half of the year, it is reasonable to assume that the management of the three Doosan companies has either presented or is in the process of presenting such plans to their respective boards in July and August. In light of the substantial financial losses that the National Pension Service (NPS) and minority shareholders are likely to incur due to the recent sharp decline in share prices, has the board discussed the connection between these Value-up disclosure plans and the proposed transactions? In other words, why the board did not announce its own Value-up program prior to these transactions?
3. Many global bluechips, including Apple and Microsoft, have established a practice of making available, on their websites, recordings of conference calls held with investors. This transparency and fairness in shareholder communications have become a global standard for listed companies. Given this precedent, we would like to inquire whether the company plans to release recordings of the conference calls with foreign investors that were reportedly conducted promptly following the announcement of the transaction involving the three companies.
[To the CEO and members of the Board of Directors of Doosan Enerbility]
4. Doosan Enerbility alleges that the spin-off and merger was driven, in part, by the company's need to strengthen its financial position to fund investments in new technologies and expand its production capacity to meet growing market demand:
4.1 There will be a cash inflow of W500 billion from the sale of non-core assets like Doosan Cubex. Questions are being raised whether there is any relation to the spin-off and merger. Couldn't the company have secured the same amount by selling these assets even without going through the spin- off and merger transaction?
4.2 The disclosure states that the transfer of W700 billion in debt related to the investment business division will facilitate new investment opportunities. Can you provide more details on the specific types of investments the company plans to pursue with this additional financial flexibility?
4.3 The plan involves transferring W700 billion in debt from the investment business division. However, we would like to inquire whether selling the Doosan Bobcat stake and securing cash proceeds would be a more effective strategy for enhancing the company's ability to invest in its core business. This question is independent of the comparison with the share distribution discussed in question 5.
5. There has been a claim that the proposed share distribution arrangement, whereby Doosan Enerbility shareholders will receive Doosan Robotics shares, which holds an equity interest in Doosan Bobcat, is less beneficial to shareholders than a sale of Doosan Bobcat stake.
5.1 What specific assumptions were made about the potential cash inflow from a sale of the Doosan Bobcat stake when comparing the two scenarios?
5.2 The claim that a sale of the Doosan Bobcat stake is less favorable to shareholders, as the sale proceeds are not distributed directly, seems to overlook the potential advantages of reinvesting these funds to enhance the growth prospects. However, doesn't this argument fail to consider the potential benefits of using the sale proceeds for new investments and the positive impact on the share price due to the increase in corporate value of Doosan Enerbility?
5.3 The company has represented that Doosan Enerbility shareholders will have the opportunity to directly participate in the future growth of both Doosan Robotics and Doosan Bobcat. However, we request that the company provide a detailed explanation for its conclusion that the potential for increased shareholder value is greater under a scenario where Doosan Bobcat remains a subsidiary of Doosan Robotics, as opposed to a scenario where Doosan Bobcat is sold and the proceeds are reinvested in the core business.
[To the CEO and the members of Board of Directors of Doosan Bobcat]
6. In regards to the business synergies that Doosan Bobcast management claims behind the equity swap with Doosan Robotics:
6.1 Doosan Robotics has mentioned that it will utilize Doosan Bobcat's extensive network in North America and Europe to increase customer reach, enhance distribution channel management, and tap into existing financing programs. Please provide more details on how this collaboration will work in practice? Furthermore, are there any potential drawbacks or challenges that Doosan Bobcat might face as a result of sharing its network with Doosan Robotics?
6.2 Doosan Robotics has announced that it will provide automation and robotization solutions and services to Doosan Bobcat and utilize Doosan Bobcat's facilities as a testing ground for new technologies. Please elaborate on the specific types of solutions and services that Doosan Robotics plans to offer to Doosan Bobcat, and what competitive advantages these solutions will provide compared to existing options in the market?
6.3 Given the potential for significant sales growth in the manufacturing and logistics market through the cross-selling of Doosan Robotics' products with Doosan Bobcat's forklifts, please provide a breakdown of the specific products that will be cross-sold and projections for the increase in sales 6 months, 1 year, and 2 years post-merger?
6.4 By combining Doosan Robotics' expertise in collaborative robots for professional services with Doosan Bobcat's global reach in construction, logistics, and agriculture, the latter aims to enter and dominate the professional services robot market. Please elaborate on the specific segment of the professional services robot market that the company is targeting and provide a forecast for the expected sales growth in this segment.
6.5 Doosan Robotics has highlighted its strengths in robotization software and manipulator technology. To better understand the company's competitive positioning, has a benchmarking study been conducted against key competitors in the collaborative robot market? If so, could the company share the key findings of this study, including a comparison of the company's technology capabilities, software features, and overall product performance?
August 12th, 2024
Korean Corporate Governance Forum
Chairman, Namuh Rhee & Vice Chairman, Joonbum Cheon
Note: Please note that original document in Korean was distributed on August 9th, 2024.