COMMAX, which grew into a small but strong global smart home company roughly 50 years after Chair Byeon Bong-deok founded Jungang Electronics Industry on the Cheonggyecheon stream in 1968, is being sold to Kyungdong Navien. After second-generation head Byeon Wooseok took full control and the company swung to losses, the firm, suffering a cash crunch, is ending family management and being sold.
Shares of the company, which faces the risk of delisting, have been suspended from trading since March last year. A "disclaimer of opinion due to scope limitation" from the external auditor on the 2023 annual report triggered grounds for a substantive delisting review. The company submitted a management improvement plan to the Korea Exchange (KRX) and has been granted a period for improvement.
COMMAX said on the 17th that the largest shareholders (including related parties), including CEO Byeon Wooseok (21.31%) and Chair Byeon Bong-deok (11.09%), signed a sale and purchase agreement to transfer about 7.52 million shares they hold to Kyungdong Navien for 12 billion won. When the deal is completed in Feb. next year, Kyungdong Navien is set to become the largest shareholder with 47.34% of the company's equity.
Separately from acquiring the largest shareholders' equity, Kyungdong Navien also plans to participate in a paid-in capital increase that the company is pursuing to secure operating funds. It will be allocated about 27.66 million newly issued shares and contribute 20 billion won. The new shares in the paid-in capital increase will be issued at 723 won per share.
After the paid-in capital increase is completed, Kyungdong Navien will hold more than 80% of the company's equity. To resolve the company's liquidity crisis, Kyungdong Navien also decided to lend an additional 5 billion won to the company, and this loan is slated to be converted into equity later.
Because of this, some have mentioned the possibility that Kyungdong Navien could launch a tender offer later. However, regarding this, the company said, "We are not considering a voluntary delisting."
With Kyungdong Navien acquiring COMMAX, family management that lasted nearly 60 years has come to an end. Assessing the communications business as promising, Byeon started with telephone switchboards and intercoms. After releasing door phones, the company built a nationwide sales network, and it now holds more than a 30% share of the domestic smart home market with products such as door locks, wall pads, and CCTV. COMMAX has also expanded overseas, selling products in more than 120 countries.
But management difficulties began in earnest after son Byeon Wooseok took over the company. After graduating from Seoul National University's College of Music and working in Italy as an opera singer, Byeon joined COMMAX's management in 2006, then took over management control in 2021 and led the company.
What dealt a direct blow to COMMAX's business was the slump in the real estate market. When new apartment complexes go up, COMMAX supplies products and generates sales, but as the real estate downturn dragged on, the company's revenue fell sharply. The company swung to losses starting in 2021 and has posted tens of billions to hundreds of billions of won in losses each year.
Amid the ongoing cash crunch, the company's stock price also plunged. In 2021 it topped 10,000 won, but just before trading was suspended in March last year, it fell below 3,000 won. As the price fell, most investors are sitting on losses, and their money has been locked up for nearly two years due to the trading halt.
With Kyungdong Navien acquiring the company, expectations are high for normalization, but investors focused on the acquisition price. The family transferred management control to Kyungdong Navien at 1,600 won per share. That is a steep discount from the price just before the trading suspension early last year (2,885 won).
A Kyungdong Navien official said, "We expect synergy with our existing smart home business through the acquisition of COMMAX," signaling the intention to normalize the company.