South Korea’s National Pension Service (NPS) officially notified that it intends to vote against the merger between Mirae Asset Daewoo Securities Co. and Mirae Asset Securities Co. in an attempt to secure its rights to request the brokerages to buy its stakes back.

According to finance industry sources on Wednesday, NPS sent an official notification saying it would reject the proposal of merger between Mirae Asset Daewoo Securities and Mirae Asset Securities that is to be put to a vote at a general shareholders meeting on Friday.

The pension operator’s decision to vote against the merger comes after Mirae Asset Daewoo Securities and Mirae Asset Securities shares finished Wednesday at 7,500 won ($6.56) and 21,800 won, respectively, below the prices at which NPS can exercise appraisal rights with 7,660 won and 22,300 won, each. The appraisal rights allows shareholders who oppose a major change in a company, such as a merger, to request the firm to repurchase their shares, and this is designed to prevent the firm involved in a merger from paying less than the fair value of the shares.

NPS’s rights to request Mirae Asset Daewoo Securities and Mirae Asset Securities to buy back its stakes in the brokerages expire on November 17, and the country’s biggest institutional investor is expected to make its decision to whether or not actually exercise its rights on that day.

But market observers expect NPS to cast a blank ballot instead of voting nay on the merger proposal at the general shareholders’ meeting. The pension operator is displaying an opposition against the merger in order to practice its appraisal rights in case the two companies’ share prices further falls after the merger, said an investment bank industry official who asked to be unnamed.

Currently, shareholders who wish to ask a firm to repurchase its stake in the firm must submit its intention to oppose a major change in the company before a general shareholders’ meeting where the proposal will be put on a vote. If they either vote against or abstain the proposal at the meeting, their rights to ask the firm to buy back shares remains intact even after the proposal is passed at the meeting.

According to the two brokerage houses’ semi-annual reports this year, NPS owns 5.93 percent, or 19,369,813 shares, in Mirae Asset Daewoo Securities and 9.19 percent, or 10,507,271 shares, in Mirae Asset Securities. If NPS fully exercises its appraisal rights over the shares in the two brokerage houses, the two firms will have to buy back their stocks worth over 400.5 billion won from NPS.

On Thursday, Mirae Asset Daewoo Securities shares ended at 7,540 won, up 40 won or 0.53 percent from the previous session while Mirae Asset Securities closed 21,750 won, down 50 won or 0.23 percent.

By Han Woo-ram and Hong Jang-won

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]