[At a Crossroads: Listed Companies] Fantagio Acquired by Delisting Specialist GNC Partners

[Asia Economy Reporter Jang Hyowon] The entertainment management company Fantagio has been sold to GNC Partners. GNC Partners is a company deeply involved with numerous companies that have been suspended from trading or delisted.

◆ Fantagio, damaged by JC Group, acquired by GNC Partners

According to the Financial Supervisory Service's electronic disclosure on the 22nd, Gold Finance Korea, the largest shareholder of Fantagio, signed a contract on the 14th to sell 22,775,800 shares (31.33%) to GNC Partners. The price per share was 660 KRW, with a total transfer amount of 15 billion KRW. A deposit of 3 billion KRW was paid on the 17th.

Fantagio is a comprehensive entertainment company managing actors, singers, and producing albums. Artists such as Ong Seongwu of Wanna One, Astro, Weki Meki, and Hello Venus are affiliated.

The previous largest shareholder, Gold Finance Korea, is a subsidiary of the Chinese company JC Group. After JC Group acquired Fantagio at the end of 2016, Fantagio recorded losses of around 10 billion KRW annually. Although the management business generated profits, losses increased due to unrecovered loans to JC Group affiliates.

Ultimately, Fantagio fell into a state of capital erosion last year. Currently, JC Group's Chairman Wang Yijie is reportedly detained by Chinese public security on charges including illegal fundraising and fraud.

◆ GNC Partners, related to SFC, a company facing delisting crisis

GNC Partners, which will become Fantagio's largest shareholder, is a corporation established in 2016 with capital of 150 million KRW. Its main business purpose is management consulting, and its CEO is Mr. Lee. CEO Lee is also the representative of a company called Taega.

Taega was the largest shareholder of SFC. After acquiring SFC in 2016, Taega transferred the largest shareholder position to Haedong Partners in 2018. Haedong Partners is also an affiliate of Taega and GNC Partners. Despite the name changes, they have continuously owned SFC.

SFC has been suspended from trading since March last year due to a disclaimer of opinion from auditors. Although given a grace period for improvement, it failed to submit an audit report with an appropriate opinion this year as well, standing at the crossroads of delisting.

The reasons for the disclaimer of opinion include ▲ failure to receive reliable financial statements ▲ transaction reliability ▲ asset recoverability ▲ scope and transaction details of related parties ▲ failure to receive financial statements of subsidiaries and affiliates. Essentially, audit materials were not submitted in all areas.

In fact, SFC acquired a company called Korean Standard Fintech for 6 billion KRW in 2017. At that time, the company had net assets of 400 million KRW and a net loss of 1 billion KRW. The acquisition amount was written off as a loss within a few months. Korean Standard Fintech is also a corporation where CEO Lee of GNC Partners serves as an inside director.

◆ Cloverbio Hightech at the brink of delisting one year after acquisition

Cloverbio Hightech is another listed company related to GNC Partners' affiliated companies. Cloverbio Hightech was also suspended from trading in March last year due to a disclaimer of opinion from auditors.

In April 2018, Cloverbio Hightech's largest shareholder changed to Power Republic Alliance. At that time, GNC Partners also acquired old shares. CEO Lee of GNC Partners is also involved with Power Republic Alliance.

After acquiring Cloverbio Hightech, they withdrew company funds as loans. According to the 2018 business report, Cloverbio Hightech lent 2.5 billion KRW to Power Republic Alliance, 2 billion KRW to GNC Partners, and 1 billion KRW to Korean Standard Fintech. The funds lent to Power Republic Alliance were recorded as unpaid illegal proceeds last year.

Subsequently, Power Republic Alliance sold most of its shares in December 2018 before the audit report was released. The shares were pledged as collateral to a loan company and were subject to forced sale.

Currently, shareholders harmed by Cloverbio Hightech have formed a minority shareholder coalition, filed a petition to the Blue House, and lodged complaints with the Center for Monitoring Speculative Capital to recover damages.

A financial investment industry official said, "Focusing on asset stripping rather than performance improvement or corporate value growth after acquiring a company is a typical corporate raider behavior," adding, "Attention should be paid to the management actions when the largest shareholder and management of a listed company change."

Repeated attempts to contact Fantagio and GNC Partners for their opinions were unsuccessful.

Meanwhile, Fantagio announced on the same day that it will proceed with a paid-in capital increase worth 20 billion KRW. 5 billion KRW will be used for operating funds, and 15 billion KRW will be used for acquiring other companies. The capital increase targets include Istar Global and Y&Y Company. The CEO of Istar Global was previously an executive of Poibos, a company that was delisted in the past.