Silchester International Investors LLP, the UK-based asset manager holding a 7.1% stake in Orion as its third-largest shareholder, issued a statement on May 25 demanding the South Korean confectionery company redirect surplus cash flow toward increased shareholder dividends. The statement, scheduled for public release on May 26 local time, warned that Orion will lose Silchester's support if the board does not revise its capital allocation policy. Silchester criticized Orion's recent consideration of acquiring JoongAng Ilbo newspaper as a speculative acquisition unrelated to core business, arguing that the company's low dividend payout ratio has enabled management to divert shareholder funds into ventures outside its confectionery operations, thereby harming minority shareholder interests.
Silchester Criticizes JoongAng Ilbo Acquisition Consideration as Unrelated to Core Business
In the May 25 statement, Silchester stated that "the newspaper business falls outside Orion's core business area" and that "there is no justification for the acquisition." The asset manager argued that Orion's consideration of purchasing JoongAng Ilbo represents a misuse of shareholder capital on ventures disconnected from the company's confectionery operations. Silchester asserted that "Orion's low dividend payout ratio has acted as a factor allowing the board to use shareholder funds for acquisitions unrelated to Orion's core business," adding that "this damages the interests of minority shareholders."
Ligachem Bioscience Investment Cited as Precedent of Capital Diversion
Silchester pointed to Orion's investment in biotechnology company Ligachem Bioscience as an existing precedent of diverting capital and cash away from core business operations. The asset manager claimed this prior investment demonstrated a pattern of management allocating resources to ventures outside Orion's confectionery focus. Silchester stated that "Orion should return surplus cash flow to shareholders through dividend expansion rather than engaging in speculative acquisitions unrelated to core business."
Silchester Holds 7.1% Stake in Orion as Third-Largest Shareholder
Silchester began investing in Orion in August last year. The UK-based value investor currently holds 2,806,335 shares of Orion, representing 7.1% of the company's total issued shares. According to this year's interim report, Silchester ranks as Orion's third-largest shareholder after Orion Holdings and the National Pension Service. Silchester specializes in identifying and investing in undervalued stocks. The asset manager stated that "dividend expansion will allow Orion Holdings, Orion's largest shareholder, to make independent decisions on asset allocation."
FAQ
What did Silchester demand from Orion on May 25?
Silchester International Investors LLP issued a statement on May 25 demanding that Orion redirect surplus cash flow toward increased shareholder dividends instead of pursuing acquisitions unrelated to its core confectionery business. The UK asset manager warned that Orion will lose Silchester's support if the board does not revise its capital allocation policy.
How large is Silchester's stake in Orion?
Silchester holds 2,806,335 shares of Orion, representing 7.1% of the company's total issued shares. The UK-based asset manager ranks as Orion's third-largest shareholder after Orion Holdings and the National Pension Service, according to this year's interim report. Silchester began investing in Orion in August last year.
