April 25, 2024

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Kyung Nam Pharm, a local drug maker known for its vitamin supplement product Lemona, is once again looking for an owner after failing to sign a deal with South Korean media company KMH Group in 2018.

So far, two local companies -- Bio Genetics and Next BT-- have expressed a willingness to make the acquisition.

Bio Genetics is a condom maker that bought a 11.29 percent stake in Kyung Nam Pharm earlier this month by investing around 15 billion won in partnership with local camping tent maker Liveplex. 

“Since last year, we’ve been working on drug development, so we thought synergies could be made by acquiring Kyung Nam Pharm,” a Bio Genetics official told The Investor. The company, however, declined to confirm whether it planned to aquire more Kyung Nam Pharm shares.

Next BT’s intention is to buy a stake held by Kyung Nam Pharm’s major shareholder Milestone KN Fund, which owns 12.48 percent of Kyung Nam Pharm. Next BT failed at this after Milestone KN refused last month.

Next BT is considering filing a lawsuit against the major investor of the fund, saying the investor breached a contract under which Next BT had paid for the stake in advance.

Aside from these two, there was speculation that Korean pharmaceutical giant Chong Kun Dang is also interested. The company denied the rumors.

“There’s no room for synergy,” a Chong Kun Dang spokesperson told The Investor.


Out of the frying pan

Having suitors fight over it was not a situation Kyung Nam Pharm had imagined last year, when South Korean financial authorities suspended trading of its stocks, on suspicion of accounting fraud. Kyung Nam Pharm was listed on the Kosdaq market in 2001. The company was also placed at risk of being delisted from the Kosdaq market by the Korea’s bourse operator.

Amid the chaos, Kyung Nam Pharm in June last year announced that it was looking for a new owner and soon picked media business firm KMH Group as its preferred bidder for a major stake. However, KMH Group decided at the end of last year to back out of the deal.

“At the time we were chosen as the preferred bidder, but there were some conflicting opinions between stakeholders in Kyung Nam Pharm. So, we viewed that the pharmaceutical company did not have enough driving force to proceed with the deal and gave up on the acquisition,“ a KMH Group official told The Investor.


Silver linings

At the beginning of this year, the company finally saw a silver lining. The KRX slapped a 12-month probation period on Kyung Nam Pharm to correct its accounting errors and improve the company’s management and financial conditions.

“Although delisting is not out of the question, it’s hard for us to tell whether Kyung Nam Pharm will actually be kicked out of the market,” a KRX spokesperson told The Investor. According to KRX data, only five companies out of 38 that received probation period have been ordered to delist since 2008.

To remain listed, Kyung Nam Pharm says it already started making some improvements.

“We issued new shares to secure additional investment and improve the company’s overall financial condition. Our debt dropped to 5.5 billion won from 11.1 billion won at the end of last year,” a Kyung Nam Pharm official said. The company also announced that its sales in China are expected to increase by 5 percent this year, mostly based on flagship product Lemona.

Furthermore, industry sources are also upbeat about the fact that the two companies that are eyeing Kyung Nam Pharm are both in the pharmaceutical sector, since there had been doubt and criticism about whether KMH Group was a good match for Kyung Nam Pharm.

By Song Seung-hyun (ssh@heraldcorp.com)