UNION KOREA PHARM, which is undergoing corporate rehabilitation (court receivership) proceedings, submitted a rehabilitation plan to the court. UNION KOREA PHARM has fallen into a state of complete capital impairment and faces the risk of delisting, but Bukwang Pharmaceutical plans to proceed with the acquisition for 30 billion won regardless.
On Mar. 7, according to pharmaceutical and legal sources, the administrator of UNION KOREA PHARM submitted a rehabilitation plan to the 14th Division for Rehabilitation of the Seoul Bankruptcy Court last month. It has been about five months since UNION KOREA PHARM entered rehabilitation proceedings in Sep. last year.
The rehabilitation plan is said to include a measure to repay debt with the sale proceeds. UNION KOREA PHARM's debt is in the 50 billion won range. Of this, it plans to repay part of the debt with the 30 billion won acquisition price from Bukwang Pharmaceutical. A legal source said, "A leading option is to settle the remaining debt by issuing new shares and delivering stock to creditors."
Going forward, creditors and stakeholders will submit opinions on the rehabilitation plan. The court plans to set a meeting date to vote on the rehabilitation plan. If creditors agree to the rehabilitation plan, the plan will be approved. The court will then confirm whether UNION KOREA PHARM carries out debt repayment according to the rehabilitation plan and close the rehabilitation proceedings. If so, UNION KOREA PHARM will graduate from court receivership.
Bukwang Pharmaceutical was selected in Jan. as the final acquirer of UNION KOREA PHARM through a stalking-horse method. A stalking horse first sets a bidder, and if an investor with better terms emerges, the final acquirer is determined after comparing offers. The acquisition is expected to be completed in Apr., when the Korea Fair Trade Commission's corporate consolidation review is finalized.
Founded in 1956, UNION KOREA PHARM operates a plant in Wonju, Gangwon, producing antibiotics and injectables. Bukwang Pharmaceutical currently manufactures pharmaceuticals at its existing plant in Ansan, Gyeonggi. With this acquisition, production capacity is expected to expand by 30%. Bukwang Pharmaceutical posted 200.7 billion won in consolidated sales and 14.2 billion won in operating profit last year. Each rose 25% and 775% from the previous year, respectively.
However, UNION KOREA PHARM's business conditions have deteriorated. UNION KOREA PHARM joined KOSDAQ in Jul. 2018 but now faces the risk of delisting. UNION KOREA PHARM's sales last year were 36.4 billion won, down 42% from 2023. The operating loss widened to 17.2 billion won from 5.2 billion won in 2023. UNION KOREA PHARM said, "The auditor's opinion on the 2024 annual report was a disclaimer."
UNION KOREA PHARM recorded negative (-) 23.1 billion won in total equity last year, falling into a state of complete capital impairment. Liabilities exceed assets. UNION KOREA PHARM must submit financial statements and other documents proving the reason for resolving capital impairment by the deadline for filing the annual report. Failure to meet this requirement could constitute grounds for KOSDAQ delisting.
The Korea Exchange (KRX) granted UNION KOREA PHARM a 10-month improvement period from Apr. 8 last year to Feb. 9 this year. UNION KOREA PHARM submitted its improvement plan implementation report the previous day. Within 20 business days of the filing date, the KOSDAQ Market Committee will convene to decide whether to delist.
However, Bukwang Pharmaceutical plans to continue the acquisition process regardless of whether UNION KOREA PHARM is delisted. A Bukwang Pharmaceutical official said, "We plan to improve the financial structure after Apr., when the acquisition is completed."