News
DL Construction becomes a wholly-owned subsidiary of DL E&C.
DATE 2023.10.15
VIEW 413
DL Construction becomes a wholly-owned subsidiary of DL E&C.
-DL E&C acquires 100% stake in DL Construction in a manner of comprehensive share swap.
-Eliminate dual listing structure and improve management efficiency to maximize stockholder value
-Retire DL E&C’s treasury stocks to prevent dilution of the existing stockholders’ ownership percentage
DL E&C announced on the 18th that it will acquire 100% of the common stocks in its subsidiary DL Construction to pursue a comprehensive stock swap that will make DL Construction become a wholly owned subsidiary. Currently, DL E&C owns a 64% (based on common stocks) stake in DL Construction.
DL E&C held its board meeting and disclosed on the same day that it had resolved to enter into a stock swap agreement with DL Construction. On the same day, DL Construction also held its board meeting, and tabled the agenda for entering into the comprehensive stock swap agreement with DL E&C to resolve.
Accordingly, DL E&C issues new stocks to go ahead with the stock swap that delivers stocks to the stockholders of DL Construction at a swap ratio of 1:03704268. In accordance with the Enforcement Decree of the Capital Market and Financial Investment Service Act, the stock swap ratio between the two companies was determined based on the stock swap value of the two companies which was calculated by arithmetic average of (i) arithmetic average closing price of the trading volume for the latest one month, (ii) arithmetic average closing price of the trading volume for the latest one week and (iii) the closing price of the day, as of October 17.
The two companies expect that this comprehensive stock swap will allow to eliminate the dual listing structure in which the two companies in a parent-subsidiary relationship engaging in the same construction industry are simultaneously listed on the stock market, and to enhance the efficiency of capital and management in order to maximize stockholder value.
DL E&C will carry out the stock swap with the approval of the board of directors in lieu of the stockholders’ general meeting as it is a small-scale stock swap as specified in Article 360-10 of the Commercial Act. DL Construction plans to approve the stock swap by resolution of the stockholders’ general meeting. For DL Construction’s stockholders who oppose the stock swap, DL E&C plans to allow them to exercise their appraisal rights for the period from the date of the stockholders’ general meeting until January 10th of the next year in order to legally implement the stockholder protection procedures.
DL Construction is scheduled to hold an extraordinary general meeting of stockholders on December 21. Upon approval at the stockholders’ general meeting, follow-up procedures will be taken to finalize the stock swap early next year, and then DL E&C will become an unlisted company in March next year.
On the other hand, DL E&C announced that it intends to retire the number of common treasury stocks equal to the number of common stocks newly issued by DL E&C in order to prevent the existing DL E&C stockholders’ ownership percentage from being diluted due to the newly issued stocks in the course of this comprehensive stock swap.
Currently, the number of stocks scheduled to be newly issued is 2,944,285. In order to acquire stocks necessary for retirement, DL E&C plans to purchase 1,686,219 common stocks in the market over the next three months, in addition to 1,258,066 treasury stocks - which can be retired - currently held by DL E&C which can be retired.
An official from DL E&C said, “This comprehensive stock swap between the two companies will enable DL E&C’s stockholders to acquire high-quality blue-chip assets without substantial issue of new stocks using treasury stocks, so they can expect to increase stockholder’s return in the future through the addition of dividend resources from profit or loss on non-controlling interest.” and explained, “DL Construction’s stockholders will be delivered stocks in its parent company DL E&C that has high liquidity and new business momentum such as expansion of overseas plant project and OCUS, which will eliminate the discount factor of the stock price, and be a mutually beneficial transaction.
