REFILE-UPDATE 1-S.Korea seeks poison pill against hostile M&A

SEOUL, Nov 9 (Reuters) - South Korea is seeking to introduce a poison pill clause in commercial laws to protect companies against unsolicited takeover bids and to encourage them to spend more money on investment, instead of defending their management. The justice ministry said that it was holding a public hearing on Monday to adopt the bill, which would give shareholders the right to buy new shares via a quick process when a company is facing a hostile acquisition offer. "Our country has made hostile M&A attacks easy by removing a ceiling on foreign stock investments, but it has not had any means to prevent hostile M&A," the ministry said in a statement. The move comes after analysts and business experts have pointed out South Korea's top business groups such as Samsung spend heavily to maintain and protect control of their numerous affiliates, connected via complex web of cross-shareholdings. Listed companies in South Korea held shares in themselves worth a combined 64 trillion won ($54.8 billion) as of the end of January to defend their management, according to the statement. "Buying shares in their companies and cross-unit investments are high-cost, low-efficiency means to protect themselves, and end up wasting company money that should otherwise be used for productive investment," the ministry said. SK Group, parent of top mobile carrier SK Telecom and refiner SK Energy, clashed with Sovereign Asset Management in 2003, which unsuccessfully sought to remove its chairman. In 2006, activist investor Carl Icahn and hedge fund Steel Partners offered to the board of tobacco monopoly KT&G to buy the company, in what would have been the first unsolicited foreign takeover bid for a major South Korean firm. Seoul shares rose 1 percent by 0134 GMT, showing little reaction to the potential new law. ($1=1167.6 Won) (Reporting by Kim Yeon-hee; Additional reporting by Rhee So-eui and Shin Jieun; Editing by Jonathan Hopfner) (([e-mail]; [phone]; Reuters Messaging: [e-mail])) Keywords: KOREA POISONPILL/ (If you have a query or comment on this story, send an email to [e-mail]) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.

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