Dong-A Socio Holdings(000640) will absorb and merge its wholly owned subsidiary, Dong-A Pharmaceutical Co., and shift to an operating holding company structure. The strategy is to secure stable cash generation to expand investment in new growth engines and to simplify the governance structure to raise corporate value.
Dong-A Socio Holdings said on the 23rd that it held a board meeting and resolved to absorb and merge Dong-A Pharmaceutical Co. The merger date is Oct. 1. Before the merger date, the company plans to convene an extraordinary shareholders meeting to submit merger-related agendas, including amendments to the articles of incorporation and the appointment of directors.
The merger will proceed as a small-scale merger without issuing new shares. Because Dong-A Pharmaceutical Co. is a wholly owned subsidiary, there will be no change in the shareholder composition or equity ratios of Dong-A Socio Holdings after the merger.
With this merger as a turning point, Dong-A Socio Holdings will shift from a pure holding company to an operating holding company that directly conducts business. Going forward, it plans to directly run Dong-A Pharmaceutical Co.'s consumer healthcare business while also carrying out group new investments, discovering new growth engines, and managing subsidiaries.
The company said it has strengthened each affiliate's expertise over the past 10-plus years since switching to a holding company structure in 2013. In particular, Dong-A Pharmaceutical Co. has grown over-the-counter drugs including Bacchus, healthcare products, and derma-cosmetics, serving as the group's core cash generator.
The company noted that as competition in the global and domestic healthcare markets has intensified recently, the need has grown to internalize stable cash generation within the group and to speed up investment decision-making.
Dong-A Socio Holdings expected that by shifting to an operating holding company structure, the group can focus its capabilities on core businesses and, by establishing a single governance system centered on the board and management, enable more accountable decision-making.
It also expects that merging with a wholly owned subsidiary will ease some factors behind the holding company discount and help the market reappraise corporate value.
After the merger, the integrated entity plans to accelerate overseas expansion by leveraging the brands and distribution infrastructure held by Dong-A Pharmaceutical Co. It will expand e-commerce channels, strengthen entry into global retail chains and brand collaborations, and foster competitive global consumer healthcare brands to raise the share of overseas sales.
A Dong-A Socio Holdings official said, "This small-scale merger both carries forward the achievements of the holding company transition pursued in 2013 and is a decision to leap forward as a corporations leading the global healthcare market," adding, "Based on integrated resources and capital, we will expand investment to secure new growth engines and raise both corporate value and shareholder value."