The “Korean-style bear hug law” has resurfaced amid debate over the introduction of a mandatory tender offer regime. A central feature is a new requirement for the target company's board to state its independent judgment when a tender offer begins and publicly disclose the review plan and the reasons for its decision.
An amendment proposal has emerged that would require the boards of listed companies to publicly disclose, transparently, the results of their review of a tender offer when one begins. The proposal is considered novel in particular because it would require detailed disclosure of the offer's terms, the review plan and the reasons for the decision.
Concerns have been raised that this move could make small and mid-sized companies more vulnerable to hostile M&A attempts. Under the current law, disclosures tend to be ambiguous, creating the practical problem that small shareholders have difficulty obtaining accurate information.
The disclosure of the offer price could establish a benchmark for market valuations of companies. At the same time, some believe management's accountability would increase, as it could be required to provide grounds demonstrating that the company's value exceeds the offer price.
Critics and others who have raised concerns have also pointed out that expanding the scope of the bear hug law could create an imbalance in bargaining power with acquirers seeking to increase corporate value. Discussions on institutional design, including the classification of bona fide offers as complementary legislation, are also continuing.