Dongwon Enterprise Strengthens Control Through Merger of Dongwon Systems and Techpack Solution

[Asia Economy Reporter Jang Hyowon] Dongwon Systems announced that it will absorb and merge its subsidiary Techpack Solution. Once the merger is completed, the control of Dongwon Enterprises, the holding company of Dongwon Group, over Dongwon Systems is expected to be further strengthened.

According to the Financial Supervisory Service's electronic disclosure on the 13th, Dongwon Systems announced the day before that it will absorb and merge its subsidiary Techpack Solution, in which it holds a 56% stake. The merger plan is scheduled to be approved at an extraordinary general meeting of shareholders on September 1.

Techpack Solution is a company that produces food and beverage packaging containers such as glass bottles, aluminum cans, and PET. In 2014, Dongwon Group acquired 100% of Techpack Solution's shares from MBK Partners for 250 billion KRW. Dongwon Systems purchased 56%, and the remaining 44% was acquired by Starkist, a U.S. subsidiary of Dongwon Industries.

In this merger, Techpack Solution was valued at 353.2 billion KRW. This is a weighted average of income value and asset value. Techpack Solution recorded sales of 386.9 billion KRW and operating profit of 35.1 billion KRW last year. At the time of acquisition in 2014, operating profit was 9.6 billion KRW, showing a 265.6% growth over seven years.

The merger ratio between Dongwon Systems and Techpack Solution, proportional to Techpack Solution's corporate value, is 1 to 4.44 shares. Existing shareholders of Techpack Solution will be newly issued 4.44 shares of Dongwon Systems stock for each share they hold.

In this merger, Dongwon Systems decided not to issue new shares for the 56% stake it already holds but to issue new shares only for the 44% held by Starkist.

Starkist is a U.S. subsidiary wholly owned by Dongwon Industries, a subsidiary of Dongwon Enterprises, the holding company of Dongwon Group. Dongwon Industries acquired the canned tuna manufacturer Starkist from Del Monte in 2008. Starkist recorded strong performance last year as canned tuna sales increased due to COVID-19.

The new shares of Dongwon Systems to be received by Starkist amount to 3,569,900 shares, which is about 12.12% of the total shares of Dongwon Systems. As Starkist receives the new shares, Dongwon Enterprises, the largest shareholder of Dongwon Systems, will see its stake decrease from 80.39% to 70.56%. However, when combined with the shares held by Starkist, the total stake will rise to 82.68%, thereby increasing control.

A Dongwon official said, "It has not been decided how Starkist will dispose of the Dongwon Systems shares it will hold in the future."