Celltrion scraps merger with Celltrion Pharm

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 that Celltrion Pharm's enterprise value, based on its market capitalization, is significantly inflated, so the combination would undermine Celltrion shareholders' value.

The cancelation of their merger will derail 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 Celltrion's shareholders voted against the merger, including its major shareholder who decided to go with the majority decision.

Celltrion said that 58% of the shareholders against the marriage claimed their estimated merger ratio would fail to reflect the company’s fair value, arguing that Celltrion Pharm is trading far above its corporate value.

Another 21% of the voters said their combination would create little synergy.

In South Korea, merger ratios of listed companies are calculated based on 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 at 42.8 trillion won, compared with the 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 terms of 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 condition 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 the 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 this potential.

Meanwhile, Celltrion said it could revisit the merger with Celltrion Pharm after enhancing its corporate value.

Write to Dae-Kyu Ahn at powerzanic@hankyung.com
 


Yeonhee Kim edited this article.