Celltrion Group Overcomes First Merger Hurdle... Seo Jung-jin: "Will Accept All Stock Purchase Requests"

Celltrion and Celltrion Healthcare
Both Companies Approve Merger at General Meetings

'1 Trillion Limit' Stock Buyback Scale Is Key
Seo Jung-jin's Determined Push
"Will Accept Unconditionally Even If It Exceeds 1 Trillion"

The merger of the three Celltrion brothers, a long-cherished wish of the Celltrion Group, has passed the first hurdle. Seo Jung-jin, Chairman of Celltrion, expressed strong confidence regarding the second hurdle related to the stock purchase rights, stating, "We will handle all exercises of the purchase rights."

On the morning of the 23rd, Celltrion and Celltrion Healthcare each held extraordinary general meetings of shareholders in Songdo, Incheon, and passed the agenda item 'Approval of the Merger Agreement.' The merger is approved if more than two-thirds of the voting rights of shareholders present at the general meeting and more than one-third of the total issued shares vote in favor. Both companies succeeded in passing the agenda at the general meetings. The merger date is set for December 28.

Previously, global proxy advisory firms ISS and Glass Lewis, as well as domestic advisory firm Korea ESG Standards Institute, expressed support citing 'improvement in corporate governance,' so the merger agenda proceeded as expected to pass smoothly. Additionally, minority shareholders actively supported the merger by emphasizing its necessity, placing billboard advertisements, continuously conducting additional purchase campaigns, and congratulatory flower wreaths sent by minority shareholders were also noticeable at the general meeting venue that day.

'Stock Purchase Rights with a Limit of 1 Trillion KRW... Seo Jung-jin: "The Merger Will Be Absolutely Enforced"'

The problem lies ahead. Although the merger agenda passed smoothly, the proportion of opposition was significant, raising concerns about a large scale of stock purchase rights exercises. Stock purchase rights are rights guaranteed under the Commercial Act that allow shareholders opposing matters such as mergers to request the company to buy their shares at a certain price. Among the opposing shareholders who expressed opposition to the merger from the 25th of last month to the 20th of this month, they can exercise stock purchase rights from this day until the 13th of next month. The stock purchase prices are 150,813 KRW for Celltrion and 67,251 KRW for Celltrion Healthcare.

Currently, the purchase limit set by the Celltrion Group is a total of 1 trillion KRW. As of the first half of this year, the separate cash and cash equivalents of the two companies are 566.6 billion KRW and 209.7 billion KRW, respectively. Since the plan is to procure the insufficient purchase funds through borrowing from financial institutions, even with the 1 trillion KRW limit, they would need to borrow about 223.7 billion KRW. If the set limit is exceeded, it will inevitably place a considerable burden on the company's financial structure.

Earlier, Chairman Seo said, "If there is opposition purchase exceeding 1 trillion KRW, it means that the entire shareholders do not want the merger," and added, "If it exceeds 1 trillion KRW, it could become a hurdle for the merger, so shareholders should make a wise judgment." He also mentioned that if the purchase limit is exceeded, the merger could be canceled. Seo Geun-hee, a researcher at Samsung Securities, also said, "If the scale of stock purchase rights exercises exceeds the 1 trillion KRW proposed by the Celltrion Group, the board of directors is expected to reconsider the merger," and "The final decision on the merger is expected to be determined by the scale of stock purchase rights exercises."

However, before the general meeting that day, Chairman Seo expressed his determination to break through head-on, saying, "Whatever comes, I will break through it all." He stated, "Even if the stock purchase rights exceed the 1 trillion KRW limit, I will absolutely enforce the merger," and "I will invest even if I have to borrow money," showing his strong will to push forward. He also emphasized that even if exercises exceeding 1 trillion KRW come in, he will somehow handle them all.

However, the fact that the current stock prices of both companies are below the stock purchase prices is a cause for concern. Based on the market price that day, the stock prices of each company were 146,000 KRW for Celltrion and 65,000 KRW for Celltrion Healthcare, and since the merger was announced in mid-August, neither stock has ever exceeded the stock purchase price. It is also interpreted that the National Pension Service, the second-largest shareholder of Celltrion holding 7.43% of Celltrion shares, expressed abstention on the merger citing securing stock purchase rights, reflecting this stock price situation.

However, since all shares expressing opposition do not necessarily lead to stock purchase rights exercises, if the stock price exceeds the purchase price again during the stock purchase rights exercise period, the scale of exercises may not be as large as expected. The National Pension Service is also not expected to exercise the rights for all 10,877,643 shares it holds. Ultimately, how to overcome the gap between the exercise price and the actual stock price during the stock purchase rights exercise period is expected to be the key to the merger.

'Annual Sales Target of 12 Trillion KRW by 2030... Frontline Product "Jimpentra" Approved in the U.S.'

The U.S. new drug approval of 'Jimpentra' (the U.S. name for Remsima SC), announced that day, is expected to be a clue to resolving the gap. The U.S. Food and Drug Administration (FDA) set the notification deadline for approval as the 28th, but the approval decision was made about a week earlier on the 20th. The approval news was delivered early that morning, causing Celltrion's stock price to surge by as much as 3.94% during the trading session.

Jimpentra is a drug that changed the biosimilar 'Remsima' (generic name infliximab) from intravenous injection (IV) to subcutaneous injection (SC) formulation, and it is the only SC formulation among infliximab-based drugs. Considering this, the FDA first recommended Celltrion to apply for approval as a new drug rather than a biosimilar, leading to the new drug approval.

A banner celebrating the U.S. Food and Drug Administration (FDA) approval of 'Jempertra' is displayed at the Celltrion extraordinary shareholders' meeting held in Songdo, Incheon.
[Photo by Lee Chunhee]

Especially, with expected sales of 600 billion KRW in the U.S. and 230 billion KRW in Europe next year, Chairman Seo mentioned that "It is a product that can sell more than 3 trillion KRW in the U.S. market within three years," increasing the potential for blockbuster growth.

Researcher Wi Hae-joo of Korea Investment & Securities also said, "The approval of Remsima SC's U.S. product license is expected to be key to the merger," adding, "The announcement of Jimpentra's U.S. approval is scheduled during the stock purchase rights exercise period, so the expectation for direct sales is likely to be re-highlighted, and Celltrion has the financial flexibility to raise the stock purchase rights limit," concluding, "The merger is more likely to be successful."

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