[Funding] Polaris Sewon Increases Capital Through Rights Offering to Protect UNO

Among the procurement funds, 9 billion won is for exercising call options... Preventing dilution of Uno's shares

[Asia Economy Reporter Hyungsoo Park] Polaris Sewon has embarked on a large-scale capital increase through a paid-in capital increase to secure shares of its subsidiary Polaris Uno.

According to the Financial Supervisory Service's electronic disclosure system on the 16th, Polaris Sewon will conduct a paid-in capital increase by allocating 0.299 new shares per one existing share through a rights offering followed by a general public offering of forfeited shares. The planned issue price of the new shares is 2,545 KRW, and 10 million new shares will be issued to raise 25.45 billion KRW.

The company explained that approximately 9 billion KRW will be used to secure shares of Polaris Uno by exercising call options, and about 5 billion KRW will be used to purchase raw materials. It will invest 5 billion KRW and 6.4 billion KRW respectively in Seowon MFG's machinery and equipment in Mexico and automation facilities at Pyeongtaek plants 1 and 2.

Polaris Sewon currently holds 28.36% (3.85 million shares) of Polaris Uno. Polaris Uno issued its third series of convertible bonds worth 30 billion KRW in June last year. If all bonds are converted, 7,033,997 shares, equivalent to 34.13% of the total issued shares, will be converted into common stock. Polaris Uno may be excluded from Polaris Sewon's consolidated subsidiaries and lose control.

Polaris Sewon has planned to exercise a 30% call option on the convertible bonds. If all 30 billion KRW is converted and Polaris Sewon secures 30% of that, its shareholding ratio will slightly increase to 28.92%. The conversion price of Polaris Uno's convertible bonds is 4,228 KRW, which is higher than the current stock price. At the time of issuing the convertible bonds, Polaris Uno allowed the conversion price to be adjusted down to the par value. This appears to be a measure to reduce the risk of loss for convertible bond investors and encourage maximum conversion.

The reason Polaris Sewon wants to maintain control over Polaris Uno is that it is a key subsidiary for securing new growth engines. After acquiring Polaris Uno, it has built a diverse business structure based on Polaris Uno's sound financial structure and high recognition, producing stable performance.

Polaris Sewon recorded consolidated sales of 43.9 billion KRW and operating profit of 3 billion KRW in the first quarter of this year. These figures represent increases of 46% and 1,253% respectively compared to the same period last year. On a separate basis, sales were 20.4 billion KRW and operating profit was 1.7 billion KRW.

Polaris Uno posted consolidated sales of 23.4 billion KRW and operating profit of 1.9 billion KRW in the first quarter. Sales increased by 34.7% year-on-year. Operating profit slightly decreased due to a sharp rise in raw material prices caused by crude oil price hikes and increased freight rates due to a shortage of container ships.

Separately from Polaris Sewon's management strategy, the news of a large-scale rights offering paid-in capital increase caused Polaris Sewon's stock price to fall sharply. If the difference between the new share issue price and the current stock price is not significant, a large number of forfeited shares may occur. After the general public offering, the remaining shares will be underwritten by the lead manager. The underwriting fee for the remaining shares is 10%. There is a potential issue of a large volume of sell-off following the listing of the new shares.

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