Zico Holdings and Kodako Declare 'Hostile M&A'

Sent Certified Letter to Creditors Regarding 'Claims and Compensation', Also Communicated New Investment Plans

[Asia Economy Reporter Park Jihwan] Zico Holdings, which acquired the listed company 'Zico' on the Korea Exchange, is set to pursue a merger and acquisition (M&A) of 'Kodaco,' Zico's parent company. Zico Holdings plans to directly intervene to completely eliminate the uncertainties surrounding the bonds and debts that are currently hindering both listed companies.

Since Kodaco is under the management of creditors including the Korea Development Bank, Zico Holdings intends to first send a certified letter regarding creditor status to the creditor group and additionally communicate plans for new investments to sustain the ongoing business.

According to industry sources on the 2nd, Zico Holdings recently decided to acquire Kodaco, a KOSDAQ-listed automotive parts company, and has delivered a letter of intent to the Kodaco creditor group. Currently, the largest shareholder of Kodaco is CEO In Gwiseung, holding 15.9% of shares. However, as Kodaco is under creditor management due to loan delinquencies, Zico Holdings aims to secure management rights through prior consultations with the creditor group.

Zico Holdings and Kodaco are already intertwined through M&A activities. In July last year, Zico Holdings acquired Zico, a subsidiary of Kodaco. At that time, Zico Holdings purchased 4.5 million shares (8.42%) of Zico's management rights held by Kodaco at 2,000 KRW per share, totaling 9 billion KRW.

Subsequently, to defend stable management rights, Zico Holdings additionally purchased convertible bonds worth 7 billion KRW from 'NKDC,' a Kodaco affiliate. Not stopping there, they also accumulated shares on the market, spending a total of 4.8 billion KRW to buy 5.72 million shares. As a result, by the end of last year, their shareholding exceeded 23%.

However, an unexpected variable arose. Just two weeks after taking over management rights, Zico received a refusal of audit opinion from an external auditor. The refusal was due to insufficient audit evidence regarding impairment review of tangible assets. Consequently, plans for new funding and business expansion were disrupted, resulting in significant losses.

The stock price also plummeted. Due to accounting risks, the stock price, which had been around 800 KRW, dropped to the 300 KRW range this year. With the stock price falling to nearly one-third, evaluation losses exceeding 10 billion KRW occurred.

As a preemptive M&A measure, Zico Holdings sent a certified letter to the creditor group currently holding Kodaco's management rights, detailing creditor status and damages incurred during the M&A process. First, Zico, a subsidiary of Zico Holdings, is owed tens of billions of KRW in sales proceeds from reselling factory equipment to Kodaco. Additionally, Kodaco's sale of Zico led to a refusal of opinion, causing a violation of the 'M&A guarantee' and resulting in massive losses. Zico Holdings argues that it holds sufficient rights as a creditor.

They also plan to submit a new investment proposal. After debt restructuring, Zico Holdings intends to secure management rights of Kodaco and improve its financial structure by raising approximately 30 billion KRW through a paid-in capital increase and convertible bond (CB) investment. Furthermore, Zico Holdings has dispatched personnel to Kodaco's headquarters to secure creditor rights.

This content was produced with the assistance of AI translation services.