This article was published on Feb. 5, 2025, at 5:57 p.m. on the ChosunBiz MoneyMove site.
ISU PETASYS has confirmed that it withdrew its acquisition of the carbon nanotube (CNT) manufacturer JEIO, citing a violation of the principle of good faith by the selling party. It appears to be a strategy to pass responsibility onto JEIO, recover the contract deposit already paid, and escape the risk of penalty payments. In response, JEIO plans to launch legal actions, including a lawsuit for damages, after hiring a major law firm.
On the 5th, according to investment banking (IB) industry sources, ISU PETASYS recently notified JEIO of the termination of the stock purchase agreement (SPA) due to a violation of the principle of good faith. ISU PETASYS reportedly presented JEIO's uncooperative response to its due diligence and other procedures as a primary argument.
Earlier, ISU PETASYS disclosed plans to raise funds through a rights offering worth 550 billion won in November of last year. However, the announcement of the large-scale rights offering faced backlash from shareholders. The criticism was whether it was appropriate for ISU PETASYS, a semiconductor substrate manufacturer, to acquire JEIO, a secondary battery material manufacturer. The Financial Supervisory Service also pressured ISU PETASYS by requiring the submission of corrected reports related to the rights offering twice.
ISU PETASYS showed a very strong intent to acquire JEIO by leaving the rights offering schedule blank in the second correction report while stating, "We plan to continue pursuing the rights offering." However, unable to overcome opposition from minority shareholders and pressure from financial authorities, ISU PETASYS ultimately withdrew its acquisition plan for JEIO on the 23rd of last month. At that time, the company stated, "The seller's failure to fulfill their obligations under the stock purchase agreement resulted in grounds for contract termination," without disclosing any specific reasons.
Industry insiders believe that ISU PETASYS invoked the principle of good faith to avoid returning the already paid deposit and to evade the penalties and damages stipulated in the contract. According to civil law, the principle of good faith states that "parties in a contractual relationship must consider the legitimate interests of the other party when exercising their rights or fulfilling their obligations and must maintain trust." Since this is not explicitly stated in the law, the principle of good faith is often presented as a key argument in numerous contract breach cases.
JEIO views ISU PETASYS as having hastily constructed arguments to terminate the contract. They also assert that no specific facts regarding the contract termination have been sent, such as a certified mail description. Immediately after ISU PETASYS announced the contract termination, JEIO criticized that they "honestly engaged in a transaction with the counterparty" and that the termination was a clear breach of contract conducted unilaterally and without any prior consultation in a situation where contract termination was not possible.
Ultimately, the dispute between ISU PETASYS and JEIO is expected to be resolved in court. However, as JEIO convened a temporary shareholders' meeting to appoint ISU PETASYS personnel as directors and auditors on the same day ISU PETASYS notified the contract termination, some believe they have secured a degree of justification regarding the principle of good faith. JEIO is currently in discussions with several law firms and plans to select legal representation soon to begin legal action.