Celltrion·Celltrion Healthcare
All Merger Proposals Approved at General Meeting
Seo Jung-jin "Will Proceed with Merger Even if Share Subscription Exceeds 1 Trillion"
Boosting Stock Price through Treasury Stock Buyback and Cancellation
Issuing Additional 550 Billion Won in Notes Beyond Share Subscription
Celltrion and Celltrion Healthcare, having passed the first hurdle of the merger?the shareholders' meeting?have launched aggressive stock price support measures such as share buybacks and cancellations. These moves are interpreted as measures to reduce the scale of stock purchase requests, and with Seo Jung-jin, Chairman of the Celltrion Group, asserting, "I will unconditionally push through the merger," they have also taken steps to secure funds through corporate bond issuance.
On the 23rd, Celltrion and Celltrion Healthcare, both part of the Celltrion Group, held separate extraordinary shareholders' meetings in Songdo, Incheon, and approved the merger agenda of both companies. With a high attendance rate of 97.04% for Celltrion and 95.17% for Celltrion Healthcare relative to those entitled to vote, the merger agreement between the two companies was approved.
Previously, proxy advisory firms all expressed support citing reasons such as governance improvement, and small shareholders actively supported the merger by placing direct merger support advertisements and conducting a 'buy one share' campaign, so the approval was as expected. However, the attendance and approval rates relative to the total voting rights were not disclosed.
The merger between the two companies will take the form of Celltrion absorbing Celltrion Healthcare, issuing new shares of Celltrion to the shareholders of Celltrion Healthcare. For each common share of Celltrion Healthcare, 0.4492620 common shares of Celltrion will be allocated, with the merger price per share set at 148,853 KRW for Celltrion and 66,874 KRW for Celltrion Healthcare.
"It would be ridiculous to stop the merger due to stock purchase requests"... Full effort to boost stock price for merger success
With the merger date set for December 28, the next hurdle to overcome is the exercise of stock purchase rights scheduled until the 13th of next month. The stock purchase right is a right guaranteed under commercial law that allows shareholders opposing the merger or other matters to request the company to buy their shares at a certain price. The stock purchase price is slightly higher than the merger price, set at 150,813 KRW for Celltrion and 67,251 KRW for Celltrion Healthcare.
The problem is that the current stock prices of both companies are below the stock purchase exercise prices. As of the market price on this day, the stock prices were 146,000 KRW for Celltrion and 65,000 KRW for Celltrion Healthcare, and since the merger announcement in mid-August, neither stock has exceeded the exercise price. The National Pension Service, the second-largest shareholder of Celltrion holding 7.43% (10.88 million shares), also expressed abstention on the merger citing the securing of stock purchase rights, reflecting this stock price situation.
Because of this, concerns have persisted that if stock purchase requests exceed the set limit of 1 trillion KRW, the merger could fail. Chairman Seo had previously mentioned that if requests exceed the limit, the merger would be canceled, but at this shareholders' meeting, he expressed determination to overcome it. Emphasizing, "If the merger decision is made but is stopped midway due to stock purchase rights, it would be ridiculous for the company," he stated, "Even if the stock purchase right limit of 1 trillion KRW is exceeded, I will unconditionally push it through," and added, "I will invest even if I have to borrow money," showing his resolve to proceed.
Seo Jung-jin, Chairman of Celltrion Group, is speaking ahead of the Celltrion extraordinary general meeting held on the 23rd in Songdo, Incheon. [Photo by Lee Chun-hee]
In fact, immediately after the shareholders' meeting, Celltrion held a board meeting and decided to increase short-term borrowings by up to 550 billion KRW through corporate bond issuance. Since the borrowing purpose was stated as acquisition of treasury shares and securing operating funds, it is interpreted as funds for the exercise of stock purchase rights and the announced treasury share acquisitions. Regarding this, Vice Chairman Kyu Woo-sung of Celltrion told reporters right after the shareholders' meeting, "We have prepared separate financial funding plans in case the stock purchase exercise exceeds 1 trillion KRW."
Celltrion and Celltrion Healthcare are also making all-out efforts to reduce the scale of stock purchase requests by actively supporting the stock price. On this day, Celltrion decided to invest 345 billion KRW (2,426,161 shares), and Celltrion Healthcare 154.9 billion KRW (2.44 million shares), to begin treasury share purchases through on-market buying starting from the 24th.
Additionally, after the merger, Celltrion Healthcare decided to cancel all treasury shares it currently holds. The 2,309,813 new shares (approximately 359.9 billion KRW) allocated for these shares during the merger will be canceled as of January 4 next year, when the merger registration is completed.
'Laying the foundation for a 12 trillion KRW annual sales big pharma by 2030'
The Celltrion Group views the approval of this merger plan and the post-merger shareholder value enhancement measures as solidifying the foundation to leap forward as a global big pharma.
The Celltrion Group explains that it expects three major effects from this merger. First, the entire business cycle from development to sales will be unified, enabling large-scale investment resources for new drug and new modality (therapeutic approach) development based on improved cost competitiveness. Second, through strengthened cost competitiveness, aggressive pricing strategies will be possible, making this merger a major turning point for expanding sales regions and market share. Lastly, by integrating the two companies, the transaction structure will be simplified, financial criteria such as profitability will become clearer, transparency will be enhanced, and investor trust will increase.
Celltrion announced on the 23rd that Zimpenetra (the U.S. brand name for Remsima SC) (right in the photo) has been approved by the U.S. Food and Drug Administration (FDA).
A Celltrion Group official said, “With the U.S. new drug approval of Jimpentra (the U.S. brand name for Remsima SC) and the approval of the merger plan, we have taken a step closer to achieving the integrated Celltrion’s vision of reaching 12 trillion KRW in sales by 2030 and becoming a global big pharma. Additionally, with the development and approval processes of five new pipelines to be introduced from next year progressing smoothly, we plan to focus on the strengths of the Celltrion Group and make company-wide efforts to accelerate growth.”
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
