[Asia Economy Reporter Jang Hyowon] Ascendio, a KOSPI-listed company, has acquired shares of IMH Entertainment, a one-person agency of singer Hong Jinyoung. In exchange for transferring more than 17.5% of her shares, Hong received 5 billion KRW worth of Ascendio convertible bonds (CB).
According to the Financial Supervisory Service's electronic disclosure on the 15th, Ascendio announced that it will acquire 4,242 shares (35%) of IMH Entertainment for 10 billion KRW. This values the entire IMH Entertainment at 23.6 billion KRW.
Half of the total shares acquired, 2,121 shares, are newly issued shares. Ascendio plans to inject funds raised by issuing 5 billion KRW worth of CBs to Eugene Investment & Securities into a third-party allotment capital increase of IMH Entertainment.
The remaining 2,121 shares will be transferred from Hong Jinyoung, an existing shareholder of IMH Entertainment. Instead of cash, Ascendio plans to issue an additional 5 billion KRW worth of CBs to Hong.
Convertible bonds (CB) are bonds that can be converted into shares after a certain period. If Ascendio’s stock price rises after issuing the CBs, the bonds can be converted into shares to realize gains; if the stock price falls, the principal can be redeemed.
The CBs Hong will receive come with favorable terms. The conversion price adjustment (refixing) limit is set at the face value of 500 KRW. Currently, the conversion price is 2,725 KRW, but even if Ascendio’s stock price falls to 500 KRW in the future, the conversion price can continue to be lowered, allowing for greater capital gains. The current stock price is fluctuating around 2,500 KRW.
IMH Entertainment is a company that generates revenue from Hong’s events, broadcasts, advertisements, music albums, digital music, and performances. In 2019, it recorded high profits with sales of 4.6 billion KRW and operating profit of 3 billion KRW, but due to the impact of COVID-19 last year, sales and operating profit dropped to 3.5 billion KRW and 1.4 billion KRW respectively, and in the first half of this year, sales sharply fell to 70 million KRW. With the rapid decline in sales, it posted an operating loss of 600 million KRW.
In this situation, Ascendio valued IMH Entertainment at around 23.6 billion KRW. Ascendio expects IMH Entertainment to generate about 10 billion KRW in sales starting next year as performances and events resume in the ‘with COVID-19’ era. This estimate is based on the assumption that Hong will hold more than 420 events annually and that two newly discovered singers will actively promote their careers.
Ascendio is a comprehensive entertainment company engaged in film production, management, and performances. Through this acquisition of IMH Entertainment shares, it plans to expand the music content business with Hong and jointly promote a clothing business.
Meanwhile, Ascendio is a company that changed its name from ‘Kiwi Media Group.’ After completing rehabilitation in April last year, Pacific Industry invested 15.2 billion KRW to become the largest shareholder. Pacific Industry is a company 98% owned by Shin Dongcheol, executive director of Bando Construction and the eldest son-in-law of Kwon Hongsa, chairman of Bando Construction. Shin is known as the person who led Bando Construction’s acquisition of shares in Hanjin KAL.
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