[At a Crossroads for Listed Companies] Yeon E&B T, Reason Behind the Sale of Part of Its Suzhou Factory in China at Half Book Value

[Asia Economy Reporter Jang Hyowon] KOSDAQ-listed company Yeon-i B&T is selling part of its factory located in Suzhou, China, at a price less than half of its book value. The company stated that since its client Samsung Display is selling the factory, Yeon-i B&T expects a decline in performance and is therefore selling at this price.

However, the party acquiring Yeon-i B&T’s factory is an affiliate of the company that acquired Samsung Display’s factory. This is interpreted as evidence that Yeon-i B&T’s factory will still be needed in the future. This is why there is interest in the background of Yeon-i B&T selling the factory at a price lower than the book value.

Im Geunhwa, CEO of Yeon E&B T.

According to the Financial Supervisory Service on the 13th, Yeon-i B&T announced on the 17th of last month that it would transfer part of the LCD (liquid crystal display) manufacturing production equipment of ‘Yeon-i Electronics (Suzhou) Co., Ltd.’ located in Suzhou, China, for 4.2 billion KRW.

Yeon-i B&T is an EMS (Electronics Manufacturing Service) specialized company producing LCD monitors and electronic circuit boards (PBA) for laptops, supplying Samsung Display and Guroda, among others.

Yeon-i B&T’s Suzhou factory was established to supply products to Samsung Display’s Suzhou LCD factory. Most of the sales generated here come from Samsung Display. However, Samsung Display sold its Suzhou factory last year to CSOT, a subsidiary of Chinese home appliance company TCL Technology.

Yeon-i B&T stated in its disclosure, “Due to the termination of the large LED business of our main client, Suzhou Samsung Display, a deterioration in corporate operations is expected in the future, so we decided to transfer the factory.”

This factory is 100% owned by Yeon-i B&T, and as of the end of the first half of this year, its book value was 10.9 billion KRW. The net assets excluding liabilities also reached 20.3 billion KRW. Last year, it recorded sales of 101.8 billion KRW and has generated net profits in the tens of billions of KRW annually.

Although there was a slight slowdown in the first half of this year, since CSOT, which acquired Samsung Display’s Suzhou factory, will continue the LCD business, Yeon-i B&T’s factory is also expected to continue operating. CSOT, the second-largest display company in China, is known to have acquired Samsung’s Suzhou LCD production line to chase industry leader BOE.

An industry insider said, “There is no vacant land left in the Suzhou industrial complex area, so to continue the LCD manufacturing business at Samsung Display’s factory, the help of existing partners will be necessary,” adding, “If another company is used, contracts with factories located far away would be required, increasing logistics costs.”

In fact, CSOT also appears to need Yeon-i B&T’s factory. The entity acquiring Yeon-i B&T’s Suzhou factory this time is ‘Suzhou Gaoshengdal Guangdian Technology Co., Ltd.,’ which is an affiliate of CSOT.

Suzhou Gaoshengdal Guangdian Technology Co., Ltd. is a subsidiary of a Chinese company called Gaoshengdal. Gaoshengdal is led by Zhao Zhongyao, former vice chairman of TCL. Zhao Zhongyao holds 21% of the shares in this company. TCL holds 20% of the shares, making it the second-largest shareholder.

Ultimately, as the Chinese TCL side acquired Samsung Display’s Suzhou factory, it also acquired the vendor company Yeon-i B&T’s factory, creating a structure where Yeon-i B&T’s factory is purchased at less than half of its book value.

Repeated attempts to contact Yeon-i B&T for comment on this matter were unsuccessful.

Meanwhile, the board of directors of Yeon-i B&T, which changed ownership at the end of last year, was composed of both Chinese and Korean members, but recently, a provisional injunction filed by the Chinese side to suspend the duties of the Korean directors was granted. The sale of Yeon-i B&T’s Suzhou factory was decided by the Chinese directors.