Reorganization of the Doosan Group: Why Delist Doosan Bobcat (Jewel of Doosan Group)?

• On 11 July, the Doosan Group announced a major business structure reorganization, including the delisting of Doosan Bobcat Inc (241560 KS).

• In our view (over the next 3-6 months), these transactions appear to be value-destroying for Doosan Bobcat and Doosan Enerbility minority shareholders but positive for Doosan Robotics shareholders.

• Doosan Robotics plans to acquire the remaining 54% stake in Doosan Bobcat through a tender offer. Once Doosan Robotics fully owns Doosan Bobcat, its shares will be delisted.

Photo by Matt Seymour on Unsplash

On 11 July, the Doosan Group announced a major business structure reorganization, including the delisting of Doosan Bobcat Inc (241560 KS). Currently, Doosan Bobcat is a subsidiary of Doosan Enerbility (034020 KS). After the business reorganization, Doosan Bobcat will become a subsidiary of Doosan Robotics (454910 KS).

Doosan's explanation of this business reorganization is to strengthen its competitiveness in the robotics field by utilizing Doosan Bobcat's financial power and network. Once the business structure reorganization is completed, Doosan Corp is expected to be able to secure the cash distributed by Doosan Bobcat through its affiliate Doosan Robotics.

There a lot of moving parts in these transactions and in order for them to be successful, they need the shareholders approval of Doosan Enerbility, Doosan Robotics, and Doosan Bobcat.

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Reorganization Process #1 - Split of Doosan Enerbility

The first process of the Doosan Group reorganization is the split of Doosan Enerbility into two entities including a) its core energy business (existing) and b) a new investment unit. Doosan Corp currently owns a 68.19% stake in Doosan Robotics and a 30.39% stake in Doosan Enerbility. Post the split off of Doosan Enerbility and merger swap between Doosan Enerbility and Doosan Robotics, Doosan Corp will continue to maintain the controlling management rights of these entities.

Through this split off and merger, Doosan Robotics will benefit from securing shares of highly valuable Doosan Bobcat which has consistently generated high levels of cash flow. Doosan Robotics will become an intermediary holding company responsible for the Smart Machines business areas, including robotics, automation, and construction equipment and vehicles.

Doosan Enerbility will continue to focus on its core energy related businesses such as next-generation nuclear power plants (SMR) and gas turbines, and existing energy business areas including large nuclear power plants.

Reorganization Process #2 - Merger Swap Between Doosan Enerbility and Doosan Robotics

After the split of Doosan Enerbility, its investment unit will be merged into Doosan Robotics. The shareholders of Doosan Enerbility will be allocated shares of Doosan Robotics according to the split-merger ratio for the stocks they own as of the split-merger new share allocation date.

Merger swap ratio - The merger swap ratio is 0.0315651 shares for every one common share of Doosan Enerbility.