Foreign equity holdings in Korea's major blue-chip companies have been rising constantly this year, exposing them to dangers of hostile merger and acquisition (M&A) attempts, a brokerage report warned yesterday.
Seoul Securities said local blue-chip firms are expected to face tougher managerial influences from abroad, as foreign stakes in some such firms have risen by up to 28.6 percentage points since the end of last year.
In many cases, however, the possibility of hostile M&A bids are considered slim and expanding foreign investment may indeed help boost share prices, said the brokerage.
Foreign shares in Samsung Electronics Co., for instance, rose to 52.9 percent as of March 17, up by 5.89 percentage points from the end of 1999, said the report. Similarly, foreign equities in Kookmin Bank, Shinhan Bank and Cheil Communications exceeded the 40 percent level, while Samsung Electro-Mechanics, LG Chemical and Hyundai Motor saw their foreign interest climg above the 30 percent mark, it noted.
"Despite the 5.89-point rise in foreign stake in Samsung Electronics, the equity holdings by largest domestic shareholders and allies amounted to just 13.8 percent, including the 6.7 percent owned by Samsung Life Insurance and 4 percent by Samsung Corp.," the report said.
The largest Korean shareholder interests in Kookmin and Shinhan banks are also estimated to be less than 10 percent. "Foreigners' steady purchases of blue chips are especially noteworthy, standing in sharp contrast to the downturn in the Korea Stock Price Index so far this year."
However, Seoul Securities said there is little likelihood of hostile M&A attempts at foreign-controlled companies. It also noted that rising foreign stakes will lead to deeper foreign participation in management, proving a boost to stock-market values in the long run.
Elaborating on the methods for managerial participation, the report said, "Foreign shareholders may join forces to ask for measures to boost share prices and express opposition to large-scale investment projects or illicit subsidies to affiliates."
Updated: 03/21/2000
by Yoo Cheong-mo Staff reporter
03/21/2000
