Doosan scraps controversial Robotics-Bobcat merger plan

Doosan Group has officially scrapped its merger plan between Doosan Robotics and Doosan Bobcat, following shareholder opposition and regulatory pressure. However, the group still intends to move forward with its broader strategy to integrate Bobcat under Robotics in a bid to achieve synergy across its business operations.

On Thursday, the boards of Doosan Bobcat and Doosan Robotics each convened and decided to cancel the comprehensive share exchange agreement initially designed to streamline their business structures. This decision effectively reverses a plan that was only announced about a month ago, which would have seen Doosan Robotics acquire Doosan Bobcat, subsequently delisting it as a wholly-owned subsidiary before completing a full merger.

In a joint letter to shareholders, the CEOs of Doosan Robotics and Doosan Bobcat stated, “Although the business structure reorganization appeared promising, it has become clear that proceeding without adequate support from shareholders and the market would be difficult. We will continue to explore ways to create synergies between the two companies, which may include revisiting the reorganization plan after further communication with the market."

The cancellation follows widespread criticism that the proposed merger ratio did not accurately reflect the true value of the two companies. According to the initial terms, Doosan Bobcat shareholders were to receive 0.6 shares of Doosan Robotics for each share of Doosan Bobcat they owned. This ratio, though determined in accordance with Korean law, was met with resistance as many argued it undervalued Doosan Bobcat, which is significantly more profitable than Doosan Robotics. The backlash from Doosan Bobcat shareholders and the market, coupled with regulatory scrutiny from South Korea's Financial Supervisory Service, ultimately led to the deal's collapse.

Despite the merger's cancellation, Doosan Group remains committed to its original plan of spinning off Doosan Bobcat from Doosan Enerbility and placing it under Doosan Robotics. The group argues that this restructuring is essential for leveraging synergies, particularly in bolstering its robotics business in North America and advancing its autonomous and automated construction machinery initiatives.

The key question now is whether the FSS will approve this revised spin-off or split merger approach.

“We have requested clarifications not only on the share exchange merger but also on the proposed split merger. We will thoroughly examine whether the necessary disclosures have been made and if investors are being adequately informed,” an FSS official said.

"We will submit a corrected report that fully addresses the authorities' concerns and will reschedule the shareholders' meeting and related proceedings after incorporating market feedback,” said a Doosan Group official.

The news of the merger’s withdrawal immediately impacted the stock market Thursday. Doosan Robotics’ shares closed up 4.84 percent at 69,300 won ($51.9), while Doosan Corporation, the holding company, saw a 1.02 percent increase, closing at 147,900 won. Conversely, shares of Doosan Enerbility, which stands to lose Bobcat, dropped 3.95 percent, and Bobcat shares fell 3.33 percent.