S. Korea To Swallow 'Poison Pill' To Deter Corporate Raiders?

In an attempt to curb the enthusiasm in an M&A market which rebounded strongly in Q309, the South Korean Justice Ministry has tabled a revision of its commercial laws in order to protect local companies from being taken over by hungry foreign investors. The introduction of a 'poison pill' scheme (also known as a shareholder rights plan), would allow a Korean target to issue new shares to designated shareholders at a preset reduced price, thus diluting the ownership value for a hostile bidder. At present, foreign investors own 32% of South Korea's stock market. And two of the country's flagship companies, Samsung Electronics and steel-maker Posco, are 47% and 49% foreign-owned, respectively. Interestingly, this is in complete paradox with a number of emerging market and frontier market nations who are endeavouring to attract foreign capital into their respective local economies. While the motivation for implementing such a protectionist measure in South Korea is clear, importantly, the potential impact of its introduction has had a polarising effect upon opinion.

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