'Burung Pumneun hy'... Acquisition Process Continues Despite Executive Turmoil

Mesh Korea Facing Internal Strife... Conflict Between Former CEO and Management
hy Acquisition in Final Stage... "No Setbacks Expected"
hy to Strengthen Distribution Logistics Network Under Vroong's Wing

Within Mesh Korea, the operator of the delivery agency service ‘Boorung’ that hy is pursuing to acquire, the conflict between the current management and the former CEO is deepening. While some suggest that the acquisition might be delayed, since the acquisition process is practically in its final stages, it is expected to be completed as planned unless there are major variables.

According to industry sources on the 10th, Mesh Korea resolved a third-party allotment paid-in capital increase aimed at raising operating funds from hy at the board meeting held on the 8th. The amount is approximately 80 billion KRW. Previously, Mesh Korea proactively received emergency funds of 60 billion KRW from hy to complete debt repayment. hy plans to secure about 67% of Mesh Korea’s shares through an additional paid-in capital increase of 20 billion KRW. In this case, hy will become the largest shareholder of Mesh Korea.

hy’s acquisition of Mesh Korea is seen as a step toward becoming a comprehensive distribution company. It is interpreted as a foundation to strengthen the distribution logistics network and expand categories through various services. Currently, hy has about 11,000 ‘Fresh Managers,’ formerly known as Yakult ladies. This is a unique food delivery service distribution network. For hy, at a time when it is strengthening the ‘Predit Delivery Service’ centered on Fresh Managers, acquiring Mesh Korea following razors, cosmetics, and cards is expected to significantly expand its categories. Although Fresh Managers are deployed nationwide, there are still areas where delivery is difficult, and there is a limitation that only items that can be loaded onto the electric cart called Coco can be delivered. Therefore, hy is likely to strengthen this gap with the delivery platform Boorung’s workforce from Mesh Korea. However, it is unlikely that the existing Fresh Manager tasks will be divided. Instead, the delivery tasks that existing Fresh Managers find difficult will be the main focus, and the relevant personnel will be utilized separately.

Another key point is leveraging Mesh Korea’s IT capabilities. Mesh Korea is evaluated as an organization with strong IT capabilities, which play an important role in logistics. CEO Kim Hyung-seol graduated from the University of Illinois with a Ph.D. in Data Mining Engineering, and it is known that there is a separate internal team specialized in building such systems. By building systems utilizing IT capabilities, it is expected to maximize synergies in the logistics business, including third-party logistics. With the completion of the logistics center in Nonsan, Chungnam, scheduled for June, it is anticipated that significant synergies will be realized.

Meanwhile, the internal conflict within Mesh Korea is occurring between the current management and former CEO Yoo Jeong-beom. Former CEO Yoo opposes the sale of the company to hy, claiming that the board’s procedures are illegal and the sale is unfair. On the 6th, he held a protest with this intention in front of hy’s headquarters in Seocho-gu, Seoul. Earlier, on the 25th of last month, the board dismissed former CEO Yoo and appointed CEO Kim as the new CEO.

The current management has also filed complaints against former CEO Yoo for breach of trust, embezzlement, and fraud. On the 8th, Mesh Korea stated, “We have confirmed former CEO Yoo’s criminal acts and the occurrence of tens of billions of won in financial damages,” and “On the 7th, we filed a complaint with the Seoul Central District Prosecutors’ Office against former CEO Yoo for breach of trust, embezzlement, and fraud under the Act on the Aggravated Punishment of Specific Economic Crimes.”

As internal strife continues within Mesh Korea, some in the industry view that the acquisition process might be delayed compared to the original schedule. The extraordinary general meeting of shareholders, originally scheduled for the day before the 23rd of this month, was postponed. However, since there is little chance of major variables in the overall trend, once the paid-in capital increase of 20 billion KRW, which is in the final procedural stage, is completed, the acquisition is expected to proceed without major issues.

Mesh Korea will hold an extraordinary general meeting of shareholders on the 23rd of this month to discuss the dismissal of former CEO Yoo from the position of inside director. Conversely, the agenda to dismiss the current management proposed by former CEO Yoo will also be voted on. Additionally, the appointment of Chae Yun-seo, director of hy’s Investment Management Division, as an inside director, and the appointment of Byun Gyeong-gu, head of hy’s Investment Management Division, as auditor are also expected to be discussed.

hy Predit delivery service. Photo by hy