[Edaily Reporter Kim Jinsoo ] It has been about six months since Oskotec announced its plan to make its subsidiary Genosco a wholly-owned subsidiary, but key preliminary procedures—such as the establishment of a special committee and corporate valuation—are still progressing slowly.

The merger with Genosco is considered the first step in OscoTech’s corporate restructuring and a key driver of value growth. However, as it is expected to be difficult to complete the relevant procedures by the end of the year, minority shareholders are even considering taking separate action.

According to OscoTech on the 26th, it has been confirmed that procedures—such as assembling a team of external experts—for establishing a “special committee,” the very first step in the process of merging its subsidiary Genosco, have not yet been completed.

OscoTech holds a 59% stake in Genosco. Genosco is a key subsidiary that developed the active ingredient for Lecraza, a new lung cancer drug. Since Genosco shares technology fees and royalties related to Lecraza with OscoTech, Genosco’s value is closely linked to that of OscoTech.

Initially, Oskotec pursued a KOSDAQ listing for Genosco. However, the plan did not proceed as intended due to opposition from minority shareholders—who argued that a separate listing could dilute Oskotec’s value—and the Korea Exchange’s Listing Committee’s decision not to approve Genosco’s preliminary listing review.

Consequently, OscoTech shifted its strategy to acquire the remaining shares of Genosco and make it a wholly-owned subsidiary. To do so, a valuation of Genosco’s enterprise value is essential. In March of this year, OscoTech decided to follow an independent process—including the formation of a special committee composed primarily of outside directors and external experts—to ensure the objectivity and transparency of Genosco’s valuation.

However, the special committee has not yet been formed, and the timing of Genosco’s valuation continues to be delayed. In effect, the plan to make Genosco a wholly-owned subsidiary has yet to move forward.

OscoTech also views the formation of the special committee as the starting point for the Genosco merger—as evidenced by its announcement that it would prepare for Genosco’s valuation after establishing the committee and selecting an accounting firm—but progress has been sluggish.

Both the Largest Shareholder and Minority Shareholders Want Swift Progress

Another reason the Genosco merger is significant is that it is linked to the inheritance tax issue involving Kim Seong-yeon, a Genosco director who has become OscoTech’s largest shareholder.

Last July, Director Kim inherited 3,334,768 shares of OscoTech held by the late founder Kim Jeong-geun, becoming the largest shareholder with an 8.72% stake. Combined with the shares held by Choi Eun-sil, the wife of former advisor Kim Jeong-geun, the total stake held by related parties stands at 12.45%.

Deferred payment is a system whereby the first installment is paid by the filing deadline, and the remainder is paid in installments over a maximum of 10 years. Since the deadline for filing and paying inheritance tax is six months from the end of the month in which the inheritance commenced, Director Kim must pay the first installment of inheritance tax by the end of this month. Director Kim and Ms. Choi Eun-sil have deposited a total of 3,977,292 shares of OscoTech stock with the court to secure the deferred payment of inheritance tax.

Under the Inheritance and Gift Tax Act, a maximum tax rate of 50% applies to amounts exceeding 3 billion won of the taxable base, and a 20% surcharge is added to shares held by the largest shareholder, resulting in an effective tax rate of 60%. Considering that the value of the shares was around 240 billion won at the time of former Advisor Kim Jeong-geun’s passing, the inheritance tax is estimated to be between 120 billion and 140 billion won. While the company could manage for a time or two through dividends or loans secured by shares, the burden will grow as time goes on.

Ultimately, the only financial resource Director Kim can tap into is his 13% stake in Genosco. The amount OscoTech pays to buy this stake will determine whether he can secure the funds to cover the inheritance tax. Radepange Partners, a private equity firm that participated in OscoTech’s corporate governance reform efforts last June on behalf of Director Kim, is also awaiting the results of Genosco’s valuation.

From the perspective of minority shareholders, the valuation is also an issue that can no longer be postponed. What shareholders who opposed a separate listing ultimately demand is for Genosco’s value to be incorporated into OscoTech. Since OscoTech’s enterprise value will rise only once the integration of Genosco is finalized, they are eagerly awaiting the merger more than anyone else.

Choi Young-gap, representative of the Minority Shareholders’ Alliance, stated, “We cannot just keep waiting for the company to act indefinitely, so several shareholders have gathered to discuss measures to expedite the process.”

Once the special committee is formed, the issue of expanding the authorized share capital must also be resolved. Currently, OscoTech’s total authorized share capital is 40 million shares, while the number of issued shares stands at 38,258,176. While the company could issue an additional approximately 1.75 million shares—equivalent to 4.6% of the existing issued shares—expanding the authorized share capital is essential to secure the funds for the Genosco acquisition through a third-party allocation capital increase targeting strategic investors (SIs) or financial investors (FIs). However, this is also expected to take place only after the special committee is formed, and it is unlikely that concrete results regarding the incorporation of Genosco as a subsidiary will be achieved within this year.

From OscoTech’s perspective, this is a difficult decision, as the company must anticipate various changes related to the incorporation of Genosco as a subsidiary. This is because if an SI or FI becomes a major shareholder of OscoTech during the Genosco incorporation process, it could go beyond simply providing funds to include the right to nominate directors or interfere in major management matters. In particular, since the combined stake held by the largest shareholder and related parties is only 12.45%, significant changes in the corporate governance structure are inevitable.

An OscoTech official stated, “The formation of the special committee is ongoing, and at the same time, we may proceed with efforts to increase the authorized share capital,” adding, “We will carefully consider measures to maximize shareholder value.”