Gabia's parent-company delisting bid hits turbulence as activist fund challenges tender offer

Gabia, a Kosdaq-listed company that drew attention for proposing to delist its own parent as a way to unwind a dual-listing structure, has been drawn into a dispute. An activist fund has sharply criticized the level of disclosure and the procedures surrounding the tender offer, putting the Financial Supervisory Service's next move in the spotlight.

According to investment banking industry sources, capital markets are watching closely to see whether the FSS will demand that Gabia submit a corrected disclosure filing for its tender offer. The scrutiny follows a complaint Align Partners filed July 30 against Gabia and Macquarie Asset Management's tender offer attempt. Align Partners argued that the filing omits material information ordinary shareholders need to make informed investment decisions.

Specifically, Align Partners called for disclosure of the plan to establish a joint venture called CoreHub between Gabia and Macquarie, the 600 billion won ($424 million) investment plan for a data center in Ansan, projected future earnings for KINX's Gwacheon data center, a concrete delisting plan following the tender offer, whether subsidiary KINX will also be delisted, and the conditions under which the controlling shareholder will reinvest. Align Partners holds a 14.3 percent stake in Gabia.

Gabia, a cloud and IT infrastructure company, counts Kosdaq-listed affiliates KINX, SPSoft and Axgate among its subsidiaries. Working with Macquarie Asset Management, Gabia has been conducting a tender offer for its own shares at 48,000 won per share from July 21 through Sept. 17. Under the structure, Macquarie acquires the 24.4 percent stake held by Gabia co-CEO Kim Hong-guk and related parties, then purchases shares from ordinary shareholders at the same price.

The deal has been closely watched as the first attempt to resolve a dual-listing structure by delisting the parent company. This type of transaction had been under consideration as a remedy for dual listings even before financial regulators issued dual-listing guidelines last month.

The complication is that amendments to the Commercial Act have strengthened directors' fiduciary duties to shareholders, intensifying the conflict between controlling and minority shareholders over governance restructuring. The standoff is playing out not only in cases where subsidiaries are dual-listed, but also over the method of "resolving" dual-listing structures by delisting the parent.

Shortly after the tender offer was announced, Align Partners called on Gabia's board to search for potential acquirers who might offer more favorable terms, verify the fairness of the tender offer price, establish an independent special committee, and explain the process by which information was provided to the buyer and any related conflicts of interest.

The concern stems from the "rollover" structure of the deal, in which CEO Kim and others sell their stakes to Macquarie and reinvest the proceeds back into Gabia to co-manage the company alongside Macquarie going forward. While a private equity fund is formally the party conducting the tender offer, Align Partners argued that the transaction is substantively a controlling shareholder-driven buyout for delisting purposes and therefore warrants rigorous scrutiny.

The basis for that argument is the Ministry of Justice's "Guidelines on Directors' Code of Conduct in Corporate Restructuring," published in February. The ministry said that when a controlling shareholder pursues a going-private transaction, there are serious concerns about unfair deal terms arising from information asymmetry and conflicts of interest with ordinary shareholders.

On that basis, the ministry said directors must take certain steps to protect the interests of ordinary shareholders even in a tender offer aimed at taking a company private. It specifically recommended that the board review the tender offer terms and issue an opinion, and verify the appropriateness of the tender offer price.

After the FSS complaint was filed, Align Partners and Macquarie Asset Management traded volleys. Macquarie rebuffed the allegations, saying "there is no material information required by law that has not been disclosed." It said the CoreHub joint venture, its business plan and the KINX Gwacheon data center are already publicly known and therefore do not need to be included in the tender offer filing, and that no separate economic benefits have been provided to the controlling shareholder.

Align Partners issued a further statement Wednesday, criticizing Macquarie's explanation as insufficient. It said Macquarie must disclose what non-public information was provided to the controlling shareholder during negotiations and, among that information, what specifically influenced the valuation and the tender offer price.

Align Partners argued that the economic returns received by the two sides cannot be considered substantively equivalent: ordinary shareholders who tender their shares are capped at 48,000 won per share, while the existing controlling shareholder can continue to benefit from any future increase in the company's value through reinvestment.

Gabia has since established a special committee composed of three independent outside directors and is reviewing the tender offer procedures and the appropriateness of the offer price with the help of external accounting and legal advisers.

Market participants say the FSS's decision could set a precedent that defines disclosure standards for future voluntary delistings and transactions aimed at unwinding dual-listing structures. Particularly at issue is how much information about deal terms and future business plans — beyond the tender offer price itself — must be provided to ordinary shareholders in a rollover structure.

"If the FSS demands a corrected filing, it could signal a broader interpretation of disclosure requirements in similar tender offer transactions going forward," an IB industry official said.