Proposal to Increase Supervision for Hostile Takeover by Foreign Direct Investor

Reported in the news in May was the South Korean online gaming giant Nexon Co. (“Nexon”) to  invest and acquire shares in a local competitor Gamania Digital Entertainment Co. (“Gamania”) with an aim to involve in its day to day operations. According to media reports, Gamania is a company listed on the Taiwan Stock Exchange, and is the first Taiwanese online game brand to expand to overseas markets in the areas of publishing and developing digital entertainment content in Japan, South Korea and China, and as of the end of March 2012, Nexon has bought shares in Gamania reaching 33%, more than the holding of Gamania’s CEO, Albert Liu.  The clamor relating to these reports is that many people consider online gaming industry to be one of the emerging sectors that have been on the receiving end of various forms of incentives and investment over the years.  The question is that if a foreign direct investor makes an “unwelcome” move to acquire an important local business with an aim to take over its day to day operations, is there any government supervision desirable?  As a consequence, the government is proposing to list certain specific sectors that will require a foreign direct investor to declare its intention when making a direct investment, if the investor is aiming to take over of the business' day to day operations.