Act Calls for Strict Review of Huons Lab Merger as New Form of Backdoor Listing

 
Act, a platform for minority shareholders, has urged financial authorities to conduct a strict review of the merger between Huons Global and its unlisted subsidiary, Huons Lab, calling it a new form of backdoor listing.
 
On May 21, Act announced the launch of a petition drive to gather signatures for a letter to the Financial Supervisory Service and the Korea Exchange. The merger involves Huons Global, which holds a 64.1% stake in the unlisted Huons Lab, absorbing the listed company Huons.
 
Minority shareholders argue that Huons Lab, which possesses the key growth asset of the subcutaneous injection platform technology 'High Diffuse,' is being merged in a manner that avoids scrutiny typically applied to backdoor listings. They point out that while unlisted subsidiaries are usually subject to regulations regarding 'splitting listings,' merging with an already listed affiliate may exempt the transaction from backdoor listing reviews due to the lack of a change in the largest shareholder.
Minority shareholders also contend that the estimated corporate value of Huons Lab at 129 billion won, as assessed by an external agency, does not reflect its future growth potential and is undervalued.
 
Act's representative, Lee Sang-mok, stated, "This structure effectively resembles a subsidiary listing, and the exchange should conduct a qualitative review equivalent to that of a backdoor listing." He added, "If this method is allowed, it could set a precedent for holding companies to circumvent regulations on dual listings."
 
The absence of shareholder protection measures has also been raised as a concern. Minority shareholders of Huons Global are unable to exercise their rights, such as the right to demand stock buybacks, because the merger does not require a vote at the holding company's general meeting. Investors reacted swiftly; from May 11, when rumors of the merger began circulating, to May 18, just before the announcement, Huons Global's stock price fell by 50%, while Huons' stock rose by 18.3%.
 
Lee Sang-mok emphasized, "The method of merging an unlisted affiliate into a listed one exploits a loophole in the system, and we will do our utmost to ensure this matter does not set a bad precedent in the capital market."
 
Meanwhile, Huons has stated that the merger aims to expand its pipeline of biopharmaceuticals being developed by Huons Lab, in addition to its existing synthetic drug candidates, thereby securing high-value future growth drivers.