Korean mergers, split-offs and spin-offs

Updated 2026-10-31

Corporate restructuring in Korea has long been a source of controversy, because the controlling family of a business group often holds very different stakes in the companies involved. A merger ratio or a split structure can shift value between groups of shareholders. The rules have changed several times since 2022, and another major change takes effect in December 2026.

Mergers (합병)

In a merger one company absorbs another, and shareholders of the absorbed company receive shares of the surviving company. The key number is the merger ratio (합병비율): how many surviving-company shares each absorbed-company share is worth. The board decision is filed as a merger decision (회사합병결정), and a securities registration statement follows when new shares are issued to many holders.

How the merger price is set

For years, the Enforcement Decree of the Capital Markets Act fixed a formula for mergers involving a listed company. The base price was the average of three prices before the board decision: the volume-weighted average over one month, the volume-weighted average over one week, and the latest closing price. The parties could adjust it within 30%, or within 10% for mergers between affiliates.

The rules have since moved away from a pure market-price formula:

• Since late 2024, mergers between unaffiliated companies are no longer bound by the formula, but they require an external valuation, and the board must publish an opinion on the purpose and fairness of the deal.
• From 9 December 2026, an amendment to the Capital Markets Act passed in August 2026 requires the price in mergers and similar transactions by listed companies to be a fair value that considers share price, asset value and earnings value, whether or not the companies are affiliates. External valuations must be disclosed, and for affiliate deals the audit committee selects the valuer. The details of the fair value method are to be set in the enforcement decree.

The new rules apply to board decisions made on or after the effective date, so deals already decided will still show the older method in their filings.

Worked example

Under the market-price approach, suppose hypothetical Company A has a base price of ₩20,000 and Company B a base price of ₩10,000. The merger ratio is 1 : 0.5, so each B share becomes 0.5 A shares. If B has 4,000,000 shares, A issues 2,000,000 new shares to B's holders.

Now suppose B's share price is temporarily depressed, but its assets are worth ₩15,000 per share. A market-price ratio gives B holders less than a fair value approach would. That gap, repeated in real cases, is what drove the 2026 change.

Appraisal rights (주식매수청구권)

Shareholders who oppose a merger can ask the company to buy their shares. In general they must:

• Hold the shares before the board decision is announced.
• Notify the company in writing of their opposition before the shareholders' meeting.
• Not vote for the merger, and submit the purchase request within 20 days after the meeting.

For listed shares the price is first negotiated; if there is no agreement, it is based on a market-price average set by the Capital Markets Act. Under the 2026 amendment, the board will set it by the fair value approach when no agreement is reached. The filing shows the expected price and the deadline. Foreign investors should check how their custodian handles the notices, as the deadlines are short.

Split-off (인적분할) and spin-off (물적분할)

Korean law has two kinds of corporate division, and English terms are used inconsistently. This site uses the terms below.

Example of a split-off: a holder of 100 shares in a company split in the ratio 0.7 : 0.3 ends up with 70 shares of the continuing company and 30 shares of the new company (the exact share counts depend on the par value mechanics in the filing).

A spin-off into a wholly owned subsidiary does not change what shareholders hold on the day. The issue arises later, if the subsidiary sells shares to new investors or lists on the exchange. The parent's shareholders then own the best business only through a diluted stake, and the parent's share price often trades at a discount to its holding.

Shareholder protection for spin-offs

After several high-profile spin-off listings, the authorities adopted protections in 2022:

• Disclosure: the decision filing must explain the purpose, the expected effects and any plans to list the subsidiary, along with measures to protect shareholders.
• Appraisal rights: since the end of 2022, shareholders of a listed company who oppose a vertical spin-off can ask the company to buy their shares, as in a merger.
• Listing review: if a spin-off subsidiary applies to list within five years, the exchange reviews whether the parent made enough effort to protect its shareholders and can refuse the listing if it did not.

In 2026 the authorities went further and proposed to restrict such duplicate listings in principle, with approval by the parent's shareholders under a 3% voting cap on the largest shareholder. Lawmakers have also proposed giving parent shareholders priority in the subsidiary's IPO. When this guide was written in October 2026, the details and timing of these measures were not yet final; check the latest FSC and KRX announcements.

Where to find these filings

The deals page lists mergers, splits and business transfers, ranked by deal size relative to total assets. For each, read the purpose, the ratio, the external valuation, the appraisal right price and the schedule.

Comparison with the US

In the US, merger consideration is negotiated, boards rely on fairness opinions, and appraisal rights depend on state law, such as Delaware's. A US spin-off usually distributes the subsidiary's shares to the parent's shareholders, which is closer to the Korean split-off. The Korean vertical spin-off followed by a separate listing is closer to a US carve-out IPO.

Recent m&a & spin-offs →