[At a Crossroads: Noblem&b② Acquires Capital-Eroded Company for 19.4 Billion Won]

Acquisition of Capital-Deficit Companies Without Sales... Taking on Debt
Company Valuation Based on Assumed Explosive Growth After Next Year
Sellers Can Sell Shares at High Prices and Also Profit from CB Gains

[Asia Economy Reporter Jang Hyowon] Noble M&B, a KOSDAQ-listed company, acquired an unlisted corporation in a state of capital erosion for 19.4 billion KRW. Despite having no current performance, the company valued the target by applying an optimistic assumption that it will grow more than twice annually in the future.

According to the Financial Supervisory Service’s electronic disclosure on the 2nd, Noble M&B acquired 64.5% of the shares of a corporation called ‘Once’ from ‘MSway’ for 19.4 billion KRW. This implies an overall corporate valuation of Once at 30 billion KRW.

Noble M&B homepage capture.

The basis for valuing Once at 30 billion KRW is the company’s own projection that its performance will explode starting in 2024.

According to an external evaluation report on Once, it is expected to generate 100 million KRW in after-tax operating profit from next year. Subsequently, the projections estimate operating profits of 2.3 billion KRW in 2024, 3.4 billion KRW in 2025, 6.7 billion KRW in 2026, and 11.1 billion KRW in 2027, roughly doubling each year. Furthermore, it is assumed that from 2028 to 2037, Once will generate 11.1 billion KRW in operating profit annually.

Once’s revenue is generated through contracts licensing the use of its patented ‘transparent conductive film’ technology. MSway, Once’s former parent company, produces products such as transparent electrodes for organic solar cells and smart windows using this technology. Once receives 3% of the sales revenue generated from these products.

However, Once currently has no performance. After recording sales of 5.1 million KRW in 2019 and 150 million KRW in 2020, it reported zero sales last year and this year. It has incurred net losses every year, accumulating a deficit of 2.2 billion KRW.

Due to the accumulated losses, Once is currently in a state of complete capital erosion. As of the end of the first half of this year, Once’s total assets amounted to 1.3 billion KRW, total liabilities were 3.5 billion KRW, and total equity was negative 2.2 billion KRW. Becoming the owner of this company essentially means taking on its debt.

MSway, which produces products using Once’s technology, is also in an uncertain business situation. MSway’s main business is semiconductor embedded systems. In September, MSway sold this business unit entirely to another company. Currently, it only operates the transparent electrode product business based on Once’s technology, but it is generating no sales.

Although Noble M&B acquired a capital-eroded company with no performance, MSway, which sold Once, is expected to profit. Noble M&B paid the acquisition price for Once not in cash but with 18 billion KRW worth of the 26th series convertible bonds (CB). The 1.4 billion KRW difference was agreed not to be exchanged between the parties.

The conversion price per share of this CB is 2,550 KRW. On the 29th, Noble M&B’s closing price was 2,995 KRW, more than 17% higher than the conversion price. MSway immediately requested conversion upon receiving the CB, and if the stock price remains at the current level until the listing date on the 16th, it can secure profits exceeding 18 billion KRW.

Meanwhile, if MSway’s CB is converted into shares, a total of 7,058,821 shares (23.97%) will be newly issued, making it the largest shareholder of the single corporation.