TYM, Suspicious Dealings with Chairman Kim Hee-yong's Daughter's Company②

[Asia Economy Reporter Jang Hyowon] Suspicious transactions involving TYM, an agricultural machinery manufacturer (formerly Dongyang Moolsan Enterprise), and the family company of Chairman Kim Heeyong have been detected. Contracts for services were signed with the children’s private company, or subcontractors were created with ownership stakes held by the owner’s family.

Dongyang Media Sales Building.

Service Sales from a Publishing Company?

According to the Financial Supervisory Service’s electronic disclosure on the 17th, there is a related party of TYM called ‘Dongyang Media Sales.’ Dongyang Media Sales is a publishing company established in 2013 that sells books and magazines. It currently operates a book platform called ‘Octobooks,’ which mainly imports and distributes overseas children’s books.

This company is 100% owned by Kim Sowon, Head of Management Support at TYM and child of Chairman Kim Heeyong, as of July 2020. Although there was a capital increase afterward, Kim is still identified as the major shareholder. Currently, the CEO of Dongyang Media Sales, Choi Moonseong, is also Kim’s husband.

In the early days of Dongyang Media Sales, TYM accounted for more than half of its sales. In 2015 and 2016, Dongyang Media Sales recorded sales of 4.2 billion KRW and 6.5 billion KRW respectively, with 2.2 billion KRW and 3.7 billion KRW of those sales being to TYM. At that time, it is analyzed that TYM purchased books and publications distributed by Dongyang Media Sales.

Moreover, from 2020, Dongyang Media Sales sold services and other non-physical goods to TYM. In 2020, Dongyang Media Sales recorded approximately 2 billion KRW in other sales to TYM. By the third quarter of last year, other sales reached 1.8 billion KRW.

According to industry sources, TYM signed contracts with Dongyang Media Sales for marketing agency services and paid service fees. Dongyang Media Sales, having received the service fees, then contracted with another marketing agency to carry out the work. What TYM could have contracted directly was instead processed through Dongyang Media Sales. This is analyzed as a typical ‘pass-through fee’ structure that causes issues in large corporations.

Regarding this, a TYM official explained, “We signed a service contract because the conditions proposed by Dongyang Media Sales were favorable. There may have been subcontracting due to deficiencies on their part, but we are not aware of that.”

Owner Family’s Stake Inserted into Subcontractor

There is another transaction between TYM and Kim Sowon’s company. In July 2020, Kim established a company called ‘TYM ICT’ with capital of 800 million KRW and sold 60% of the shares for 480 million KRW to TYM.

Subsequently, in March last year, an additional capital increase of 180 million KRW was made, and currently, TYM holds 48.98% of TYM ICT’s shares, while Kim and others hold 51.02%. Originally a subsidiary of TYM, the shareholding fell below 50%, changing its status to an affiliate.

TYM ICT recorded sales of 600 million KRW in about five months in 2020 and approximately 2.1 billion KRW in sales by the end of the third quarter last year. The company supplies autonomous driving chipsets and systems used in tractors and other equipment.

All sales are to TYM. Previously, TYM purchased autonomous driving-related parts from external companies, but after establishing TYM ICT, it has been sourcing related parts through this company. Essentially, this is a form of spinning off TYM’s business unit into a separate corporation.

Typically, in such cases, companies make the spun-off unit a 100% subsidiary through in-kind contributions or physical division. This is because most early sales occur through the parent company, and profits are attributed to the parent accordingly. However, TYM ICT’s majority shares were taken by the owner’s family.

A TYM official explained, “The corporate form was created instead of a business unit to facilitate future expansion and investment in autonomous driving-related businesses. The owner’s equity investment is for risk diversification and responsible management.”

Meanwhile, TYM, listed on the KOSPI in 1973, is a company engaged in manufacturing agricultural machinery such as tractors and combines, as well as the tobacco filter business. Last year, the company changed its name from Dongyang Moolsan Enterprise to TYM.

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