The 69-year-old pharmaceutical company Dongsung Bio Pharm has applied to exit court receivership (rehabilitation). It comes a year after entering rehabilitation for management normalization. Dongsung Bio Pharm is accelerating procedures to end rehabilitation and preparing to expand its hair dye business.
Earlier, Dongsung Bio Pharm entered court receivership after an ownership dispute between an uncle and a nephew, and the company was sold to a consortium of Taekwang Industrial and UAMCO (United Asset Management). Dongsung Bio Pharm says it completed repayment of debt with the sale proceeds.
◇Application to end rehabilitation… "Repayment of debt with sale proceeds"
According to the pharmaceutical industry on the 8th, Dongsung Bio Pharm on the 6th submitted an application to end rehabilitation to the 11th bankruptcy division of the Seoul Bankruptcy Court. If the court accepts it, the company will move toward normalization.
The Taekwang Industrial–UAMCO consortium invested 160 billion won in acquiring Dongsung Bio Pharm and normalizing management. Of that, 70 billion won was used to purchase new shares of Dongsung Bio Pharm, and 90 billion won was used to purchase corporate bonds. Dongsung Bio Pharm said, "On this basis, we completed repayment of debt on the 30th of last month."
Founded in 1957, Dongsung Bio Pharm is known for its Seven-Eight hair dye, Dongsung Minoxidil for hair loss, and the antidiarrheal Jeongro-hwan. Former Chairman Lee Yang-gu, the son of the late former Chairman Lee Sun-gyun, sold a 14% equity stake in Dongsung Bio Pharm to the marketing company Brand Refactoring for 12 billion won in Apr. last year after his nephew, former CEO Na Won-gyun, took over the company. At the time, Na's stake was in the 4% range.
Dongsung Bio Pharm then applied for rehabilitation to the court in May last year. Rehabilitation is a system in which corporations are placed under court supervision, repay part of their debt in installments, and have the remainder forgiven. Former CEO Na and a third party, Kim In-su, were appointed co-trustees and pursued a pre-approval merger and acquisition (M&A), and the Taekwang Industrial–UAMCO consortium was selected as the final acquirer. UAMCO is a public-leaning institution established with investments from commercial banks. In Mar., the court approved Dongsung Bio Pharm's rehabilitation plan.
◇Task to resolve a 10 billion won deficit… "Expanding the hair dye business"
Dongsung Bio Pharm's rehabilitation process was not smooth. Management was replaced, and the company abruptly applied to terminate rehabilitation. Former CEO Na Won-gyun stepped down in Sep. last year, and former Brand Refactoring CEO Yoo Young-il took office. Dongsung Bio Pharm applied to the court in Nov. that year to terminate rehabilitation. Legal circles at the time called it "an unusual case in which a corporation applied for rehabilitation, then changed management and sought termination."
Dongsung Bio Pharm's application for termination was not accepted, and the rehabilitation proceeded. After Taekwang Industrial and UAMCO decided to acquire Dongsung Bio Pharm, former CEO Yoo Young-il resigned, and consortium representative Choi Yong-seok was appointed last month. Choi previously served as head of Pharmanovia Korea and as an executive at AstraZeneca. Four outside directors, including accountant Park Geun-su and attorney Park Jin-won, were also newly appointed.
Dongsung Bio Pharm plans to expand its hair dye business after graduating from court receivership. Aekyung Industrial Co. and cosmetic subsidiary SIL, acquired by Taekwang Group, are engaged in the cosmetics business. A Dongsung Bio Pharm official said, "We will create synergy by linking hair dye products and cosmetics," adding that the company plans to sell through home shopping and media commerce.
Meanwhile, trading of Dongsung Bio Pharm shares has been halted since May last year. The company said, "We are awaiting the Korea Exchange (KRX)'s review to resume stock trading." Dongsung Bio Pharm's sales last year were 87.2 billion won, down 1% from a year earlier. The operating loss was 10.1 billion won, widening from the previous year's 5.7 billion won loss.