UAMCO (United Asset Management) will acquire Dong Sung Bio Pharm, which is undergoing rehabilitation. Dong Sung Bio Pharm plans to submit a rehabilitation plan to the court detailing how it will repay debt with the sale proceeds. If creditors agree to the plan, rehabilitation will be approved and the company will begin normalization.
On Jan. 2, according to the pharmaceutical industry and according to legal sources, Dong Sung Bio Pharm decided at the end of last year to select UAMCO as the final acquirer. UAMCO is a public institution established with investments from commercial banks. An industry official said, "Because Dong Sung Bio Pharm's liability is about 86 billion won, the acquisition price will be much higher," and added, "I understand that the parties are coordinating details related to the signing of the acquisition contract."
With UAMCO as the preliminary acquirer, Dong Sung Bio Pharm proceeded with a stalking-horse sale in which, if a better-terms investor emerged, the company would compare conditions and decide the acquirer. At the time, a mid-sized group also jumped into the bidding and reportedly offered more than UAMCO. UAMCO then indicated it would raise its price, exercised its right of first purchase, and is said to have been selected as the final acquirer.
Founded in 1957, Dong Sung Bio Pharm is embroiled in a management dispute between an uncle and a nephew. Former Chairman Lee Yang-gu, son of the late founder Lee Sun-gyun, sold a 14% equity stake to the marketing firm Brand Refactoring for 12 billion won in Apr. last year after former CEO Na Won-gyun, his nephew, took charge of the company. Na's stake at the time was only in the 4% range.
Amid this situation, Dong Sung Bio Pharm filed for rehabilitation with the court in May last year, and the process began. Rehabilitation is a system under which corporations, under court supervision, repay part of their debts in installments and have the remainder forgiven. Former CEO Na and a third party, Kim In-su, were appointed co-administrators and began a pre-approval merger and acquisition (M&A).
Former CEO Na then stepped down in Sep. last year, and Yoo Young-il took office as the new CEO of Dong Sung Bio Pharm. Dong Sung Bio Pharm then applied to the court to terminate rehabilitation (close the proceedings). Separately, Brand Refactoring has repeatedly filed appeals and re-appeals against the court's commencement of rehabilitation. A re-appeal refers to an appeal to the Supreme Court against a second-instance decision. Brand Refactoring is said to argue that debt can instead be repaid by selling non-operating asset.
The court has not yet ruled on terminating Dong Sung Bio Pharm's rehabilitation. In the industry, some question whether there is any need to end the process when the court has deemed rehabilitation necessary, initiated the proceedings, and even finalized a buyer. If the court does not accept termination, the acquisition process, which is in its final stage, will proceed as is. If termination is accepted, the ongoing process will be scrapped.