Orbitech, a KOSDAQ-listed company, is pushing to acquire its affiliate FINE TECHNICS through Fine Group led by Chair Hong Seong-cheon. Attention in the industry has focused on the deal as Orbitech, which has repeatedly acquired and then sold listed companies through mergers and acquisitions (M&A) to book sizable gains, has emerged as the acquirer.
In particular, Orbitech plans to cover part of the acquisition price by issuing convertible bonds (CB) to the existing largest shareholder and using them for substitute payment after the CB issuance. Orbitech also used convertible bonds to raise funds when it acquired DNA Link (now JS Link) earlier this year before selling it.
Orbitech said on the 11th that it signed a contract to acquire 29.83% equity in FINE TECHNICS held by the largest shareholder, along with management control. Before the management control sale was released, FINE TECHNICS shares traded around 1,700 won, but Orbitech plans to acquire control by paying 4,930 won per share, or a total of 25 billion won, reflecting a control premium.
What stands out in this deal is Orbitech's financing plan. Of the 25 billion won acquisition price, Orbitech will use 20 billion won of its own funds and cover the remaining 5 billion won by issuing CBs to Kodes and FINE DNC, major shareholders of FINE TECHNICS. It will issue convertible bonds for payment of the price.
Orbitech's past investment cases are also in the spotlight in light of this deal structure. Orbitech has engaged in active M&A and exited within relatively short periods on multiple occasions.
DNA Link, whose equity was sold on Jan. 1, is a representative case. In Nov. 2023, Orbitech took part in DNA Link's paid-in capital increase to secure an 8.5% equity stake for 5 billion won, and in May last year it acquired about 1.6 million shares held by the largest shareholder for 12.3 billion won.
At that time as well, Orbitech raised part of the acquisition funds by issuing convertible bonds to the existing largest shareholder. It issued CBs to Enter Media, a related party, and Lee Jong-eun, the founder and then-largest shareholder of DNA Link, and then used substitute payment for the acquisition funds.
After Orbitech's acquisition, DNA Link's share price surged. The rise began after the new largest shareholder, Orbitech, released plans to pursue a new business of manufacturing rare-earth permanent magnets.
Subsequently, in January this year Orbitech sold 3.19 million shares of DNA Link for about 24 billion won. Orbitech had also invested in DNA Link's convertible bonds, and as the stock price spiked, it converted them into shares and booked substantial gains.
An industry official said, "Some say Orbitech applied a significant control premium to FINE TECHNICS, but looking at past investments, it does not seem Orbitech set the purchase price at an excessive level."
Meanwhile, Fine Group earlier this year tried to sell FINE TECHNICS to a party with markedly insufficient financing and failed. The industry sees Fine Group as moving to sell FINE TECHNICS to secure funds needed for succession.
It is highly likely the group will simplify its governance by using the sale proceeds to increase equity in the remaining core affiliates. Currently, at the top of Fine Group, Chair Hong Seong-cheon holds equity in three listed companies—Fine M-Tec, FINE DNC, and FINE TECHNICS. Going forward, Director Hong Jun-gi of Fine M-Tec, Hong's son, and Kodes, a family company in which the owner family holds equity, are likely to take center stage in the governance structure.