Korean Corporate Governance Forum Chairman Lee Nam-woo, right, delivers opening remarks during a seminar on Doosan Group's governance restructuring plan at IFC Seoul, Monday. Yonhap

The Financial Supervisory Service (FSS) on Wednesday ordered Doosan to correct its prospectus on the business group's controversial plan to merge its lucrative construction equipment unit, Doosan Bobcat, with its money-losing robotics affiliate, Doosan Robotics.

Upon the request, the validity of Doosan Robotics' prospectus was suspended immediately, meaning the merger plan will be on hold, for now.

"The prospectus may confuse investors, due to the lack of important information," the FSS said in its letter of request. "Unless the company corrects its prospectus within three months, the document will be regarded as invalid."

A Doosan spokesman explained that it is usual for companies to receive such requests when they try to merge their affiliates.

However, some market insiders pointed out that it is unusual for the financial authorities to ask for corrections to a prospectus related to a merger of affiliates, although the regulators tend to make such requests toward initial public offerings.

The FSS made the request a couple of days after Financial Services Commission Chairman nominee Kim Byoung-hwan promised to review the necessity of reforms in the current system, after Democratic Party of Korea Rep. Kim Hyun-jung urged the financial authority to look into Doosan's merger plan thoroughly.

Doosan Group announced on July 11 that it would spin Doosan Bobcat off from Doosan Enerbility and delist the construction equipment maker from the benchmark KOSPI to make it a fully owned subsidiary of Doosan Robotics.

Since then, foreign investors have continued unloading of their Doosan Bobcat shares over the past two weeks, according to data compiled by the Korea Exchange.

Between July 12 and 23, the net-selling of Doosan Bobcat shares by foreign investors reached 197 billion won ($142 million), marking the third-largest net-selling by foreigners during the period.

Although Doosan Bobcat held a private conference call exclusively for foreign and institutional investors on July 12, the company's top executives appear to have failed to reassure them.

"I was so angry and disappointed, so I sold most of my shares during the intraday trading," Sean Brown, director of global investments at Texas-based Teton Capital Partners, said in fluent Korean during a seminar hosted on Monday by the Korean Corporate Governance Forum (KCGF) in Seoul.

He described the planned merger as "robbery," given that each Doosan Bobcat share will be exchanged for 0.63 Doosan Robotics shares, thereby giving a higher value to the robotics firm's shares.

The KCGF also claimed that the restructuring plan is intended to benefit controlling shareholders.

Park Yoo-kyung, head of emerging market equities at APG Asset Management, said in a separate seminar on Tuesday that most of the largest listed companies here have continuously damaged shareholder value, making it more difficult for investors to bet on the Korean market.

Doosan Group explained that it complied with the Capital Markets Act in setting the ratio, which stipulates the exchange ratio for mergers involving listed companies be determined based on the average of their recent stock prices.

"Both companies will stop redundant investments as they will be able to work together in R&D," a Doosan Group official said.

In addition, Doosan Bobcat is said to be considering retiring its treasury stocks, so that its shareholders can hold larger stakes.

However, minority shareholders saw the planned treasury stock retirement as being intended to block them from asking the company to buy their shares before the merger.

Amid the growing controversy, Doosan Bobcat announced on Wednesday that its second-quarter revenue fell 16.3 percent year-on-year to 2.2 trillion won. Its operating profit dropped by 48.7 percent to 239.5 billion won during the period.

Its stock price closed at 47,050 won, a 2.79 percent decline from the previous session.