As the presidential election approaches, an influx of pro-natal policies has caused the stock price of GGUMBI, a company related to childcare products, to rise, prompting the firm to utilize its previously issued convertible bonds (CB) to acquire equity in a KONEX-listed company. By purchasing equity in Gaia Corporation, a baby product distribution specialist, the company is kicking off its business expansion. This opportunity for the company to capitalize on the rise in stock price linked to policy-themed stocks has been evaluated as a timely move.
Recently, GGUMBI's stock price has soared significantly. As the stock price increased above the conversion price of the first tranche of convertible bonds (CB) issued last year, the company decided to use this as payment for the acquisition. It agreed to pay half of the 5.7 billion won purchase price for the equity of Gaia Corporation using convertible bonds. With the stock price increase, conditions were established to use some of the CBs as payment for the acquisition, thereby greatly reducing GGUMBI's financial burden.
As of the 12th, according to the financial investment industry, GGUMBI has become the new largest shareholder, holding 2,025,066 shares of Gaia Corporation. The ownership percentage is 43.39%, surpassing that of the previous largest shareholder and founder, CEO Na Won-seok, who holds 1,991,000 shares (42.66%).
On the 29th of last month, GGUMBI signed a stock transfer agreement to acquire equity in Gaia Corporation worth 5.7 billion won. It made a large-scale purchase of shares, acquiring from global toy partners such as Global Toy Partners Investment Association (702,179 shares), Kolon 2021 Innovation Investment Association (300,000 shares), and NH Investment & Securities (232,559 shares) at 3,200 won per share.
GGUMBI paid a down payment of 570 million won on the contract date, with an interim payment of approximately 2.9 billion won scheduled to be paid on the 20th using cash or by purchasing the first tranche of CBs before maturity. The remaining balance of 2.3 billion won will be paid in cash on the 30th of the same month.
The first tranche of CBs that GGUMBI is using for interim payment was issued by the company in April last year, and excluding 1,247,155 shares that were listed on the 9th due to the exercise of conversion rights, there are currently 1,270,461 shares remaining. This amounts to approximately 10.1 billion won. The CB, which matures on March 17, 2029, had its conversion price adjusted downwards from 8,826 won to 7,944 won, the lowest adjustment limit last November, due to a decline in the stock price after issuance.
If GGUMBI's stock price is lower than the CB conversion price, it would not hold much value for use as acquisition funds. However, thanks to being linked as a policy-themed stock recently, GGUMBI's stock price has soared significantly. After falling to 7,010 won at the end of March, GGUMBI's stock price surged to approximately 13,860 won as it entered a phase of early presidential elections after April.
As of the 9th of this month, the stock price is slightly down from its peak at 10,770 won but still about 35% higher than the CB conversion price. With the value of the CB increasing, the company has been able to use this instead of cash for the acquisition.
Earlier, GGUMBI acquired management rights of Ermora, the leading online shopping mall for infants and children in Korea, for 12.75 billion won in February. At that time, the payment was made entirely in cash. The scale of the acquisition of Gaia Corporation this time also accounts for 70% of GGUMBI's cash and cash equivalents (8.2 billion won) as of the end of last year. Unlike the acquisition of Ermora, this time, the CB can be used like cash, reducing actual cash expenditure.
The counterparty could benefit by converting the CB into stock and selling it, and if the stock price falls below the conversion price, they may also exercise the put option starting February 16 next year. This has been evaluated as a 'win-win' contract for both sides.
Gaia Corporation is a distribution partner for global character content brands such as Disney, Marvel, and Warner, and holds exclusive sales rights in Korea for Hot Toys, a figure manufacturing and sales company based in Hong Kong. Last year's sales increased by 22.54% year-over-year to 38.6 billion won, and the operating profit was 1.6 billion won, turning to profitability and showing signs of a recovery. This is similar to GGUMBI's sales last year (39.5 billion won), while its operating profit (400 million won) is four times higher.
GGUMBI plans to enhance its competitive edge in online and offline distribution related to baby products by acquiring Gaia Corporation following Ermora this year. GGUMBI stated, "This acquisition of equity in Gaia Corporation is a decision aimed at business diversification and securing new growth engines."