Doosan Group Chairman Park Jeong-won, third from right, examines an artificial intelligence-driven bartending robot at the company's exhibition booth during CES 2024 at the Las Vegas Convention Center in this January photo. His younger brother, Doosan Enerbility Chairman Park Gee-won, is on the chairman's left side in the photo. Courtesy of Doosan Group

Doosan Group is facing an increased risk of failure in its second attempt at governance restructuring, as shareholders of Doosan Enerbility, including the National Pension Service (NPS), are under growing pressure to vote against the company's plan to spin off Doosan Bobcat, a profitable construction equipment maker. This move has raised concerns among investors about the potential impact on the group's overall strategy.

The spin-off plan is mainly intended to place the lucrative subsidiary under the control of Doosan Robotics, the group's struggling robotics firm.

Doosan Enerbility decided to convene a shareholders' meeting on Dec. 12 to vote on the proposed spin-off, following a long-awaited approval from the Financial Supervisory Service on Nov. 22 for the governance restructuring plan.

However, Institutional Shareholder Services (ISS) published a report on Thursday recommending investors to oppose Doosan Bobcat's spin-off from Doosan Enerbility, citing concerns over a potential conflict of interest and the lack of a review by independent directors.

The world's largest proxy adviser pointed out that the restructuring plan could harm Doosan Enerbility's minority shareholders, potentially benefiting controlling shareholders, including Doosan Group Chairman Park Jeong-won and his family, at their expense.

"A vote against this resolution is warranted," ISS said. "While there is strategic merit in spinning off a non-core stake, the logic of merging it with Doosan Robotics lacks a compelling rationale while valuation appears unfavorable."

Given that ISS holds significant influence over institutional and foreign investors in the capital market, there are growing expectations that the NPS, which holds a 6.85 percent stake in Doosan Enerbility, may follow its recommendation to oppose the spin-off.

Foreign shareholders own about 23 percent of Doosan Enerbility, while Doosan Corp. and allies hold a combined 30.67 percent stake in the company.

On Friday, the Solidarity for Economic Reform also issued a statement to urge the NPS to vote against Doosan Enerbility's plan at the forthcoming meeting of its shareholders.

"It should sound the alarm about transactions made for the benefits of controlling shareholders," said the civic group focusing on protecting minority shareholders' rights and improving corporate governance structures.

Align Partners Capital Management, which asked Doosan Enerbility's minority shareholders to entrust the asset management firm with their voting rights to thwart the spin-off plan, welcomed the recommendation from the ISS, saying that its analysis is reasonable.

"If Doosan Enerbility sells its shares in Doosan Bobcat at a low price, its minority shareholders will suffer damage, while its controlling shareholders enjoy benefits," Align Partners CEO Lee Chang-hwan said.

After facing a severe backlash from investors and policymakers about its initial restructuring plan announced in July, Doosan scrapped its plan to make Doosan Bobcat a wholly-owned subsidiary of Doosan Robotics in August and announced a revised plan in October.

Under the new plan, Doosan Robotics will still become the parent firm of Doosan Bobcat with a 46 percent stake.

However, 100 shares in Doosan Enerbility can be swapped with 88.5 shares in Doosan Enerbility plus 4.33 shares in Doosan Robotics, instead of 75.3 Enerbility shares and 3.15 Robotics shares.

Doosan explained that the new exchange ratio would allow minority shareholders to enjoy higher returns, which ultimately led the financial watchdog to approve the restructuring plan. This approval came despite complaints from retail investors, who expressed concerns about Doosan Enerbility losing Doosan Bobcat to Doosan Robotics.