[At a Crossroads] Bion③ Major Shareholder Who Transferred Unlisted Stocks and Took Cash

CTM Subsidiary Gwangjin Sanjeon Acquired 28% Stake for 6 Billion Won
CTM Secured Borrowed Acquisition Funds in Cash

Capture of Baion homepage.

CTM, the largest shareholder of KOSDAQ-listed company Baion, has sold unlisted company shares to Baion. As a result, the portion of Baion's acquisition funds that was arranged through borrowings has been almost entirely secured in cash.

According to the Financial Supervisory Service's electronic disclosure system on the 15th, Baion announced on the 7th that it would acquire 571,200 shares (28%) of Gwangjin Sanjeon for 6.02 billion KRW. The payment was made entirely in cash, with 10% of the contract amount paid on the contract day and the remaining 90% paid the day before.

Gwangjin Sanjeon is a company that manufactures cores (CORE) for generators and electric motors. Its major clients include HD Hyundai Electric and Hyosung Heavy Industries. The company produces eco-friendly high-voltage motors and other products in response to the enlargement of shipbuilding vessels and environmental regulations.

The counterparties in the Gwangjin Sanjeon stock transaction are CTM and CTM CEO Jeon Byeong-cheol. They hold 70% and 30% of Gwangjin Sanjeon's shares, respectively.

CTM became the largest shareholder of Baion after acquiring it in November last year. CTM acquired old shares from former Baion CEO Kim Byung-jun and others for 11.9 billion KRW and additionally invested 7 billion KRW through a paid-in capital increase, securing a total of 17.55% of Baion's shares. The former CEO is the largest shareholder of CTM and the actual owner of Baion.

At the time of Baion's acquisition, CTM arranged about 7 billion KRW of the acquisition funds through borrowings. By selling Gwangjin Sanjeon shares to Baion this time, CTM secured cash of a similar scale to the borrowings. Essentially, the Gwangjin Sanjeon shares were used to purchase Baion shares.

Nevertheless, the former CEO did not lose any control over Gwangjin Sanjeon. Even excluding the 28% stake of Gwangjin Sanjeon acquired by Baion, the remaining 72% allows exercising management rights. Moreover, the 28% stake is structured as former CEO → CTM → Baion → Gwangjin Sanjeon, meaning the former CEO ultimately holds all influence.

The reason CTM and the former CEO could secure 6 billion KRW in cash with a 28% stake in Gwangjin Sanjeon is that Baion valued Gwangjin Sanjeon at 21.5 billion KRW. According to CTM's 2022 audit report, Gwangjin Sanjeon's value was 14.2 billion KRW. This means the value increased by more than 51% in one year.

The high valuation of Gwangjin Sanjeon is based on future performance estimates. Gwangjin Sanjeon presented projections of 21.4 billion KRW in sales and 3.5 billion KRW in operating profit starting this year. From next year, it assumed about 10% annual growth, reaching 30.9 billion KRW in sales by 2028. However, since its establishment in 2010, Gwangjin Sanjeon has never exceeded 12 billion KRW in sales.

In the valuation report, the company stated, "Since most sales occur in the form of orders, this year's sales applied the expected order amount from major clients." A Baion official said, "We understand that orders have increased significantly this year due to issues with Gwangjin Sanjeon's competitors."

Meanwhile, Baion operates businesses in bio-medical, cosmetics, fuel sales, automotive injection parts, and seat sewing products. Last year, it recorded sales of 8.9 billion KRW and a net loss of 7.3 billion KRW, representing decreases of 34.2% and 26.2%, respectively, compared to the previous year.