South Korea proposes fair-value test for listed-company mergers

South Korea's Financial Services Commission proposed replacing the fixed market-price formula for covered listed-company mergers with a fair-value test.

The change is broad. It would also cover split mergers, major business or asset transfers, and comprehensive share exchanges or transfers. Fair value would consider market value, net asset value and income value, including discounted cash flow or dividend discount methods.

Boards would have to explain the transaction's purpose, expected effects, valuation and fairness measures. Outside evaluators would review the method and major assumptions. Affiliate transactions would require added disclosures about investment, debt guarantees, overlapping directors and shareholding changes.

Public comment runs from September 16 through October 6. The commission plans to put the rules into effect with the amended law on December 9.