On the Price of Appraisal Rights of Shareholders of Hyundai Engineering Co., Ltd.

   Hit. 427

In the course of merging Hyundai AMCO into itself, HEC (Hyundai Engineering) evaluated its value far below the fair value, and dissenting shareholders of HEC who opposed to the merger exercised their appraisal rights against HEC. 

HEC adopted and suggested 403,586 Korean won per a stock of HEC as the purchase price for the dissenting shareholders, which the trial court decided to be fair. The price, however, was calculated to evaluate the merger ratio of HEC and Hyundai AMCO, and thus intrinsically different from the purchase price of HEC stock. In detail, the price was calculated based on ① 2012 financial statements whose numbers were over one year earlier than the correct decision date (Jan. 15, 2014) of the purchase price, ② incorrect revenue projection which is one of the most important factor in evaluation of DCF (Discount Cash Flow), ③ unreasonable capital cost, and etc. 

Thus, the dissenting shareholders appealed to the appellate court to decide fairly the purchase price of HEC considering the financial status and the business characteristics.

The price of appraisal rights per share was confirmed at \409,565 per the appellate court’s decision, slightly up compared to the first trial, as the Supreme Court dismissed both the re-appeals on the case (Supreme Court 2016ma1184) on November 22, 2016. 

Although we argued that the appellate court erred in the process of applying the law, by impractically applying Financial Investment Services and Capital Markets Act as well as incorrectly calculating the stock base price based on outdated financial statements which is from longer than a year ago to that of the base date, the Supreme Court dismissed re-appeals without proper judicial review. We believe it is not irrelevant to the fact that the Supreme Court dismisses 70% of appeals as a result of discretionary reviews.

This case has closed as Hyundai Engineering paid the increased amount as stated in the appeal.