Brand Refactoring Criticizes UAMCO's Dong Sung Pharmaceutical Acquisition Plan as "Corporate Raid"

Brand Refactoring, the largest shareholder of Dong Sung Pharmaceutical, strongly criticized the acquisition plan of United Asset Management Company (UAMCO), the preliminary bidder for Dong Sung Pharmaceutical, which is currently undergoing corporate rehabilitation proceedings, on November 25, calling it essentially a corporate raid.

A representative from Brand Refactoring pointed out, "UAMCO is leveraging its public image as a restructuring specialist jointly funded by commercial banks, under the pretext of 'capital injection without capital reduction.' However, in reality, it is a plan that effectively neutralizes the control of the existing largest shareholder through a large-scale third-party allotment of new shares."

As a result, Brand Refactoring and minority shareholders strongly objected, calling it a 'deceptive restructuring raid,' and stated their intention to take legal action if necessary.

UAMCO is an asset management company (AMC) specializing in corporate restructuring and non-performing loan (NPL) management, jointly funded by the five major commercial banks and state-run banks such as Korea Development Bank and Industrial Bank of Korea, giving it a quasi-public character. Often referred to as the 'Korean bad bank,' UAMCO has pursued a strategy of acquiring distressed companies' bonds and assets, restructuring them, increasing their value, and then selling them.

For example, in the case of Plantec, a shipbuilding equipment company acquired in 2020, UAMCO improved its financial structure and began the sale process this year, reportedly earning a profit of around 100 billion won. With both public funds and market expertise, UAMCO has been recognized in the restructuring industry as an institution with moral authority.

Now that UAMCO is considered the leading candidate to become the new owner of Dong Sung Pharmaceutical, which is undergoing rehabilitation, attention is focused on the situation. On November 7, Dong Sung Pharmaceutical received approval from the Seoul Bankruptcy Court and signed a conditional investment agreement (commonly known as a stalking horse deal) with UAMCO, initiating an open sale process. If there are no other bidders or more favorable offers in the open competitive bidding, UAMCO will be confirmed as the final acquirer.

Industry observers regard UAMCO as the most likely acquirer. If UAMCO is selected as the final acquirer, it is expected to secure management control of Dong Sung Pharmaceutical. According to the rehabilitation plan approved by the court, the investment funds will be used to repay creditors, and UAMCO will lead additional capital injections and the normalization of management.

Previously, UAMCO reportedly emphasized the principle of "supporting the company through a third-party allotment of new shares without reducing the existing shareholders' stock." The intention is to minimize the sacrifice of shareholder value in distressed companies and to secure moral legitimacy in the acquisition of Dong Sung Pharmaceutical.

However, Brand Refactoring argued that, in substance, the core of the support method is the dilution of shares through large-scale issuance of new shares. Ultimately, if UAMCO injects new capital and acquires a significant portion of Dong Sung Pharmaceutical's new shares, the stake of the existing largest shareholder, Brand Refactoring, will sharply decline.

A representative from Brand Refactoring stated, "On the surface, it is 'support without capital reduction,' but in reality, the large-scale issuance of new shares will drastically reduce the value of existing shareholders' stakes. This is a typical expedient M&A tactic, using court receivership as a public shield to acquire new shares without the consent or participation of existing shareholders and to purchase the rehabilitating company at a low price."

They particularly emphasized the problem that UAMCO, a quasi-public institution, is taking the lead in using the third-party allotment of new shares-a common tactic in management control disputes-to secure shares.

Previously, Baek Seohyun, CEO of Brand Refactoring, publicly opposed UAMCO's acquisition at a stakeholders' briefing held last month, stating, "If the M&A is forced before approval, the value of existing shareholders will be damaged, and creditors will not be able to avoid losses." Contrary to UAMCO's slogan of 'minimizing damage to existing shareholders,' the structure inevitably harms both shareholders and creditors, he argued.

Brand Refactoring's legal representative also submitted an opinion to the court, pointing out that "the rehabilitation application and stalking horse sale process arising from the management control dispute cannot sufficiently protect the interests of creditors and shareholders," and appealed for the suspension of the rehabilitation proceedings.

Meanwhile, the largest shareholder announced plans to block UAMCO's acquisition attempt through legal action and by raising the issue publicly via financial authorities and the media. Minority shareholders are also organizing collective action through online shareholder platforms, claiming that "attempts to acquire Dong Sung Pharmaceutical at a bargain price are being carried out under the guise of a public institution."

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