Korean activist fund Align Partners unexpectedly withdrew its demand for a 90 percent shareholder return rate from Coway in its final submission on Thursday, raising concerns in the industry that the fund may be prioritizing management influence over shareholder value.

On Jan. 7, Align Partners had strongly pushed for Coway to return 90 percent of its consolidated net income to shareholders — more than double the 40 percent return rate the company had announced the previous day.

However, in its final proposal, the fund dropped its demands regarding shareholder returns and capital allocation, while still advocating for the implementation of a cumulative voting system and the appointment of outside directors.

“Align’s decision to withdraw its core demand contradicts its previous stance, making it an inconsistent move that could undermine credibility," said a financial investment industry official. "If the fund claims to represent minority shareholders, it should maintain a clear direction."

In 2013, after MBK Partners became Coway’s largest shareholder, taking over from Woongjin, the company increased its dividend payout ratio from around 40 percent to 90 percent. However, after Netmarble took over as the largest shareholder in 2020, the payout ratio dropped to around 20 percent.

“We lowered the dividend payout to 20 percent because we believed our investments in research, development and key design areas were insufficient at the time," a Coway official explained. "After addressing these issues, we raised it back to around 40 percent in January.”

The official expressed concern that Align Partners' shifting demands regarding the shareholder return rate could confuse investors and deviate from the long-term growth interests of those who have invested in the company.

Align Partners explained that it withdrew its shareholder return proposal to give Coway’s board and management the opportunity to present a “credible value-enhancement plan” that shareholders could accept.

In response, Coway said it would review the proposal to ensure it meets legal requirements before including it in the agenda for the general shareholders' meeting in March.

By Kim Hae-yeon (hykim@heraldcorp.com)