Plan to Raise 23.9 Billion KRW Through Rights Offering
Largest Shareholder Stake at 5.65%
Defending Management Rights with Golden Parachute
Jayeonwahwan plans to issue new shares to raise a large amount of capital. The funds raised will be used for investment and operating expenses of a precast concrete (PC) production plant. The fact that the largest shareholder's stake is only about 5% was cited as a risk factor. In the past, management disputes occurred due to the low shareholding ratio.
According to the Financial Supervisory Service's electronic disclosure system on the 31st, Jayeonwahwan will issue 32 million new shares by allocating 0.39 new shares per existing share. The planned issue price is 746 KRW, and the final price will be confirmed on July 18.
Jayeonwahwan produces eco-blocks, eco-friendly PC, and retention tank PC. The company has experience in manufacturing and installing the longest slab in Korea.
The 23.9 billion KRW raised through the new share issuance will be used as 21.5 billion KRW for facility funds and 2.4 billion KRW for operating funds. Jayeonwahwan is building a PC production plant in the Seokmun National Industrial Complex in Dangjin-si, Chungcheongnam-do. The total investment scale is 43.2 billion KRW by April next year, and once completed, production capacity will increase by about 40% compared to the existing level.
The number of construction sites applying the PC method is increasing. This method involves assembling and installing precast concrete components such as columns, beams, and slabs, which are manufactured in advance at the factory, on-site. Compared to on-site casting, it reduces management factors and lowers the possibility of cracks and leaks, thereby enhancing safety. The domestic PC market is expanding its application range from apartment parking lots and logistics centers to knowledge industry centers, semiconductor factories, and data centers. As the construction workforce ages and the proportion of unskilled foreign workers increases, the PC method is gaining attention as an alternative. It reduces construction waste, noise, and dust.
Jayeonwahwan recorded sales of 19.7 billion KRW and operating profit of 1.3 billion KRW in the first quarter of this year. Compared to the same period last year, sales increased by 16% and operating profit increased by 104%.
The largest shareholder of Jayeonwahwan is Data Technology, holding a 3.38% stake. Including CEO Lee Byung-yong and related parties, the shareholding ratio is 5.65%. They plan to subscribe to 100% of the allocated new shares. If the convertible bonds (CB) currently held are converted into common stock, the largest shareholder's stake will increase to 7.8%. However, if the issue price of the new shares rises and funding capacity is insufficient, some of the subscription rights certificates may be sold. There is a possibility that the shareholding ratio will decline after the capital increase.
In the past, Jayeonwahwan experienced management disputes between 2016 and 2017 due to the low shareholding ratio of the largest shareholder and related parties. To prevent hostile mergers and acquisitions (M&A), a golden parachute clause was included in the articles of incorporation. The golden parachute clause is a strategy used to increase the cost of corporate acquisition and secure stability against hostile M&A by pre-stating in the articles of incorporation the rights of existing management to receive large retirement payments, stock options, and salaries or bonuses for a certain period. Jayeonwahwan's articles of incorporation stipulate that if the CEO or directors lose their jobs due to hostile M&A during their term, they will be paid 5 billion KRW each in addition to the usual retirement benefits.
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