Hanchang Biotech Acquired by Jeonheung CNC, Corporation of Lee Yongheung, Chairman of World One Hightech

[Asia Economy Reporter Jang Hyowon] Jeonheung CNC is acquiring Hanchang Biotech. The CEO of Jeonheung CNC is Chairman Lee Yongheung of World One High Tech. Hanchang, which is selling Hanchang Biotech, will reclaim the shares of the fire safety company Hanju Chemical that it sold to Hanchang Biotech last year. As a result, it is expected that Hanchang Biotech will need a business that generates performance.

According to the Financial Supervisory Service's electronic disclosure on the 8th, Hanchang, the largest shareholder of Hanchang Biotech, signed a management rights transfer contract with Jeonheung CNC on the 4th. If Jeonheung CNC pays for a third-party allotment capital increase worth 12 billion KRW by September 15, it will secure 6,201,550 common shares (14.3%) and become the largest shareholder. The current largest shareholder, Hanchang, held 5,326,312 shares and will sell 3,257,632 shares for 6.8 billion KRW this time.

Along with this, Hanchang Biotech announced plans for large-scale fundraising through capital increase, convertible bonds (CB), and bonds with warrants (BW).

First, besides the 12 billion KRW capital increase to be paid in September, it plans to proceed with two additional capital increases of 12.5 billion KRW each, totaling 25 billion KRW. The third-party allottee is Jeonheung CNC, and the payment dates are October 2, 2023, and January 2, 2024, respectively. This disclosure includes funds to be paid up to one year and six months later.

CBs will be issued twice at 15 billion KRW each, totaling 30 billion KRW. The payment dates for the CBs are September 15 and 30. The issuer is Exergy 21, a 100% subsidiary of Jeonheung CNC, which signed the management rights transfer contract.

BWs will be issued four times at 12.5 billion KRW each, totaling 50 billion KRW. The payment dates are April 1, July 1, September 30, and December 31, 2024. All issuers are Jeonheung CNC. Hanchang Biotech has announced a total fundraising plan of 117 billion KRW to be carried out over about two years and four months.

Jeonheung CNC, which is pouring large-scale funds into Hanchang Biotech, is a newly established corporation with a capital of 1 million KRW as of July. CEO Lee Yongheung is the chairman of World One High Tech, which manufactures heat pump systems that use air heat for heating and cooling.

According to the National Tax Service’s business tax type inquiry, World One High Tech was established in 1999, closed in 2019, and became a normal corporation again in 2020. It had no sales in 2020, and last year recorded sales of 266.15 billion KRW and an operating loss of 9.62 million KRW.

Exergy 21, which decided to acquire CBs worth 30 billion KRW, was also established on June 10 with a capital of 100 million KRW. The sole inside director of this company is also Chairman Lee Yongheung. Exergy 21 is the name of the heat pump system manufactured by World One High Tech.

Along with the change of the largest shareholder, Hanchang Biotech’s business structure is expected to change. Hanchang Biotech will sell its 45.5% stake in Hanju Chemical, which manufactures and sells fire extinguishing equipment and extinguishers, to Hanchang for 25 billion KRW. This is about 54,788 KRW per share.

Previously, in October last year, Hanchang sold its shares of Hanju Chemical to Hanchang Biotech at 48,000 KRW per share. Hanju Chemical recorded sales of 22.7 billion KRW and net profit of 3.9 billion KRW last year. This was interpreted as a strategy to boost Hanchang Biotech’s performance. However, after transferring management rights of Hanchang Biotech in just over a year, Hanju Chemical will also be taken back by Hanchang.

Meanwhile, as of the end of last year, Hanchang Biotech recorded sales of 8.8 billion KRW, operating profit of 500 million KRW, and net loss of 2.7 billion KRW. Operating profit had been in deficit for three consecutive years since 2018 but barely turned positive last year. However, it recorded an operating loss again in the first quarter of this year.