PharmaResearch, a South Korean regenerative medicine company, has decided to scrap its planned spin-off, reversing course amid mounting shareholder opposition. The company had previously proposed a transition to a holding company structure, which critics argued would primarily benefit the controlling shareholder.
In a statement released on July 8, PharmaResearch said, “After careful deliberation, the board has resolved to fully withdraw the spin-off plan.” The company cited concerns raised by investors over the proposed change in governance structure, potential shareholder value dilution, and lack of sufficient communication.
“This process reminded us that corporate decisions must be based not only on legal or strategic rationale, but also on deeper, trust-based communication with shareholders,” the company added.
While the spin-off has been canceled, the company reaffirmed its commitment to enhancing shareholder value. Plans remain in place to bolster its flagship skinbooster brand Rejuran in global markets, pursue strategic investments, launch new business initiatives, and expand the use of electronic voting in shareholder meetings. “We understand that this may be disappointing for shareholders who supported the original intent of establishing a holding company,” said CEO Sohn Ji-hoon. “However, PharmaResearch will humbly listen to all voices and grow into a more shareholder-friendly company.”
The initial plan, announced last month, proposed a vertical spin-off into a holding company (surviving entity) and an operating company (new entity), with a split ratio of 74% to 26%. This triggered a strong backlash from minority shareholders, who argued that the structure would allow the majority owner to strengthen control without injecting new capital.
Critics also noted that the plan contradicted the spirit of the South Korean government's proposed amendments to the Commercial Act. The legislative changes aim to codify fiduciary duties of directors to shareholders and strengthen minority shareholder protection and governance transparency. The Korea Corporate Governance Forum stated, “The PharmaResearch case runs counter to the government’s capital market policy direction. Splitting a healthy company and listing both entities to consolidate control is an abuse of the listing system.”
Activist fund Must Asset Management, which holds a 1.22% stake, also opposed the plan. “Although framed as a spin-off, the actual structure appears designed to increase the controlling shareholder’s influence through asset contribution and dual listing,” the fund said in a prior statement, adding that it would question whether the board's decision aligned with shareholder interests under the revised Commercial Act.
The market responded positively to the reversal. PharmaResearch shares surged 13.73% on the day to close at KRW 588,000. Retail investors flooded online forums with praise, calling it “a commendable decision” and celebrating the event as “a milestone for minority shareholder activism.”
Kim Doo-yong, CEO of Must Asset Management, said, “We sincerely thank Chairman Jung Sang-soo and the leadership of PharmaResearch for swiftly responding to shareholder concerns. Personally, I believe this marks a step forward for governance in Korea’s capital markets.” He added, “As a shareholder, I hope the company will now focus fully on its core business and continue to grow as a market leader.”
