Celltrion scraps merger with Celltrion Pharm
Celltrion's minority shareholders argue Celltrion Pharm's shares are trading far above their fair value
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South Korea’s largest biosimilar maker Celltrion Inc. said on Friday that it has scrapped a plan to merge with Celltrion Pharm Inc., an R&D and local distribution affiliate, in the face of opposition from minority shareholders.
They argued Celltrion Pharm's enterprise value, based on its market capitalization, is significantly inflated, so their combination would undermine Celltrion shareholders' value.
The cancelation of their merger derailed the biosimilar group’s plan to combine three units by this year, after completing the merger between Celltrion and global sales affiliate Celltrion Healthcare Co. last year to save costs and enhance management transparency.
A survey of shareholders of Celltrion and Celltrion Pharm showed that 70.4% of the former's shareholders voted against the merger, including the votes from its major shareholder who decided to go with the majority decision.
Celltrion said that 58% of the shareholders against their marriage claimed their estimated merger ratio would fail to reflect the company’s fair value, arguing Celltron Pharm is trading far above its corporate value.
Another 21% of the voters said their combination would create little synergy.
In South Korea, a merger ratio of listed companies is calculated on the basis of their share prices.
On Friday, Celltrion’s shares added 1.34% to close at 197,200 won ($145), with Celltrion Pharm's share price down 1.82% to 75,700 won.
Celltrion’s market capitalization stood to 42.8 trillion won, compared with 3.1 trillion won of Celltrion Pharm.
By contrast, 67.7% of Celltrion Pharm shareholders voted in favor of the merger, saying the combined entity would grow into a full-fledged biotechnology company and create synergy in new drug development.
Celltrion holds a 53.81% stake in Celltrion Pharm.
In the second quarter ended in June, the two companies posted their largest-ever quarterly revenue of 874.7 billion won and 117.2 billion won, respectively.
CONSULTANTS' VIEWS
In addition to the shareholder survey, consulting companies that reviewed the proposed merger concluded that their combination would deteriorate Celltrion’s financial conditions and would likely cost more than it spent to purchase shares from shareholders opposing the merger between Celltrion and Celltrion Healthcare last year.
The outside consultants also said Celltrion Pharm has potential to grow into a contract manufacturing organization and antibody drug conjugate developer, as well as an antibody drug sales company. But it has not yet materialized them.
Meanwhile, Celltrion said it could revisit the merger with Celltrion Pharm after enhancing their corporate values.
Write to Dae-Kyu Ahn at powerzanic@hankyung.com
Yeonhee Kim edited this article
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