Celltrion Reviews 'Second Merger' with Pharmaceutical Company... Conducts 'Shareholder Survey'

Healthcare Merger Followed by Second-Stage Merger
Special Committees Formed in Both Companies to Proceed with Process
If Survey Shows Many Opposed, Merger May Fail

Following the merger of Celltrion and Celltrion Healthcare, Celltrion Group has initiated a process to seek shareholders' opinions regarding the 'second phase merger' with Celltrion Pharm.

Seo Jin-seok, CEO of Celltrion, and Seo Jung-jin, Chairman of the Celltrion Group (from left), are conducting a Q&A session at the JP Morgan Healthcare Conference (JPMHC) held last January in San Francisco, California, USA.
[Photo by Celltrion]

On the 31st, Celltrion Group announced that it has established a ‘Phase 1 Special Committee for Merger Feasibility Review’ composed solely of outside directors to examine the feasibility of a merger between Celltrion and Celltrion Pharm, and will conduct a survey targeting shareholders regarding the merger.

After completing the merger with Celltrion Healthcare earlier this year, Celltrion has been exploring various options for proceeding with a merger with Celltrion Pharm. During this process, it was determined that an independent and objective evaluation through a special committee is necessary. The plan is to establish special committees composed only of outside directors at both Celltrion and Celltrion Pharm, and have each committee conduct an independent and comprehensive internal and external evaluation to assess whether a merger between the two companies is appropriate at this time.

Previously, Seo Jung-jin, Chairman of Celltrion Group, revealed plans to complete a three-company merger including Celltrion Pharm within this year after the merger of the two companies. He declared, "We will pursue the second phase merger with Celltrion Pharm within six months after the completion of the merger between the two companies." This marks the beginning of a thorough review to determine whether the second phase merger is truly necessary.

Cheongju, Chungbuk Celltrion Pharm factory view
[Photo by Celltrion Pharm]

Going forward, the special committees will comprehensively consider various factors including the results of the independently conducted shareholder opinion survey, evaluations of expected synergies from the merger, assessments by neutral external institutions, and financial evaluations. Based on this multifaceted review of the merger’s feasibility, the committees will submit their final recommendations on whether to proceed with the merger to each company’s board of directors. If the consensus leans toward the necessity of the merger, a ‘Phase 2 Special Committee’ will be launched to actively promote the merger.

'Shareholder Survey' Underway... Merger Could Fail if Opposition is High

First, the special committees plan to conduct a ‘shareholder survey’ to gather shareholders’ opinions on the merger of the two companies. Before making a decision on whether to proceed with the merger, the committees will listen to the shareholders’ support or opposition and reflect these views in the final review results.

If a majority of shareholders oppose the merger during this opinion-gathering process, the merger may not be realized. The group explained, "As with the previous merger, the premise for this merger is that shareholders desire it," adding, "The group’s position is that absolute consent from shareholders of both companies is required." If opposition shareholders exceed a certain threshold, it could negatively impact shareholder value and lead to significant costs such as excessive exercise of appraisal rights, potentially hindering the group’s development rather than supporting it. There are also concerns that Celltrion Pharm’s stock price is overvalued compared to Celltrion.

Seo Jung-jin, the major shareholder of both Celltrion and Celltrion Pharm, and Celltrion Holdings, the group’s holding company, have stated that they will remain neutral regarding this survey and will express support or opposition in accordance with the majority shareholder opinion in the future. Opinions from domestic and international institutional investors will be collected through interviews conducted by an independent external organization.

The survey is being conducted from today until 5 p.m. on the 12th of next month, targeting shareholders registered in the shareholder registry as of the end of June. Shareholders wishing to participate can access the survey page linked on the websites of both companies and complete the survey. The survey questions include ▲support or opposition to the merger between Celltrion and Celltrion Pharm ▲the main reasons for supporting, opposing, or abstaining from the merger ▲expected outcomes of the merger ▲and preconditions for the merger.

Celltrion Group plans to announce the survey results, including the ratio of support and opposition, the special committees’ review outcomes, and board decisions according to the scheduled procedures.