[비즈한국] The sale of Initech053350, a financial and security subsidiary of the KT030200 Group, has been completed. While a private equity consortium became the owner by paying 84.1 billion won in acquisition funds, the structure is set for secondary battery material company Enchem348370 to become the largest shareholder through a subsequent third-party paid-in capital increase. CEO Ok Sung-hwan, who led the company to a turnaround, will step down just 14 months into his tenure after his reappointment motion was rejected at the general shareholders' meeting. With the company entering a "business manager" system that puts the acquirer's associates in charge of management, further turmoil appears inevitable.
KT Grand-Subsidiary Initech Sold for 84.1 Billion Won
Initech is a security and financial specialist firm dealing in banking services and authentication/encryption technology. The largest shareholder of Initech has changed from KT subsidiaries KT DS and HNC Network to AI Solution Holdings. AI Solution Holdings completed the final payment of 75.7 billion won on March 31. AI Solution Holdings is a special purpose company (SPC) jointly funded by Enchem and the RS First Private Equity Fund, which was established by the Roy Investment Partners and Simon J & Company consortium, the designated transaction parties. The final acquisition price is 84.1 billion won.
Initech announced the change in its largest shareholder and its plan for a paid-in capital increase through a public filing. Consequently, Enchem is expected to become the final largest shareholder of Initech.
According to the Financial Supervisory Service's Data Analysis, Retrieval and Transfer System (DART), Initech will conduct a 29.4 billion won third-party paid-in capital increase to secure operating funds. Of the 3,958,183 new shares, 2,612,288 shares will be allocated to the KOSDAQ-listed Enchem, and 1,345,895 shares will be allocated to Joongang Advanced Materials051980. Joongang Advanced Materials is a wireless communications equipment manufacturer that was incorporated as an Enchem affiliate last year. The payment date is the 30th, and the new shares are scheduled to be listed on the 30th of next month. During the acquisition process, AI Solution Holdings signed a collateral contract for approximately 7.37 million shares (37%) with Enchem and Joongang Advanced Materials.
Regarding this paid-in capital increase, Initech explained, "It is intended to achieve sales growth and profitability improvements through capital investment from new shareholders and the realization of business and technical synergies with the company."
Transition to "Business Manager" System Sparks Internal Backlash Over "Hasty Sale"
The sale of Initech is part of KT's strategic move to secure investment capacity for growth industries like Artificial Intelligence (AI) by shedding non-core businesses. Initech is a "cash cow" that held 107.37 billion won in current assets on its balance sheet as of the end of last year. Although it recorded losses of 2.5 billion won and 3.5 billion won in 2022 and 2023 respectively—reflecting low operating profits compared to its 40-50 billion won annual revenue—it turned a profit last year under CEO Ok Sung-hwan, showing signs of improved profitability.
At the KT general shareholders' meeting held at the KT R&D Center in Seocho-gu, Seoul, on the 31st, Park Hyo-il, KT's Chief Strategy Officer (CSO), addressed questions regarding asset and non-core business sales, stating, "While there is criticism that we are selling off future growth engines, we are focusing on selling assets with low profitability." Regarding Initech, he added, "Initech is a company with separate shareholders and a board of directors capable of making rational management decisions; we will proceed while carefully considering procedural legitimacy and future developments."
However, Initech appears headed for internal and external chaos for the time being due to the absence of leadership and employee succession issues. Following the rejection of CEO Ok Sung-hwan’s reappointment as an inside director at the annual shareholders' meeting on March 31, Initech has entered a state of CEO vacancy. CEO Ok is a KT veteran who served in various roles across KT, KT DS, and KT affiliates such as Nasmedia089600 and K-Bank. An industry insider noted, "It is believed that a major replacement of executives was already planned amidst the change in major shareholders." In response to related inquiries, a KT DS representative only stated, "We have completed the transaction with the special purpose company (SPC) established by the counterparty with whom we signed the stock purchase agreement (main contract) on that day."
Initech will now operate under a "business manager" system. A disclosure regarding the appointment of a business manager on the same day identified Kim Jin-sung, executive director of Enchem's Strategic Planning Office, as the new business manager. Kim also serves as an outside director for Joongang Advanced Materials. The explanation is that he will oversee overall management, including the appointment of directors and auditors at an extraordinary shareholders' meeting, to stabilize the business. Regarding the authority and duties of the business manager, Initech disclosed that he "bears legal authority and responsibility for business execution in accordance with the Commercial Code regarding the liabilities of 'shadow directors' and others." The new CEO of Initech is expected to be appointed at an extraordinary shareholders' meeting on May 15.
A "business manager" is a concept that utilizes the "manager" system under the Commercial Code for corporate practicalities such as M&As, management disputes, or poor performance. Even in a listed company, this person can wield authority virtually equivalent to that of a CEO without proper appointment procedures. A legal expert remarked, "In principle, the legal basis is ambiguous, and the scope of authority and responsibility is unclear. It is a management system that frequently appears during corporate M&A processes, and there is a possibility that overall management could be swayed entirely according to the wishes of the acquirer."
In addition to this, the appointments of inside director Im Moo-young, outside director Cha Haeng-jeon, and the reappointment of outside director Hong Chang-hee were rejected. According to industry sources, talk of an emergency management system also surfaced at the shareholders' meeting.
Along with the management reshuffle, business strategies are also expected to be overhauled. Initech stated that it selected Enchem for the paid-in capital increase because "we intend to introduce Enchem’s next-generation secondary battery technology, create new growth engines through new businesses, and expand our business scope." Regarding Joongang Advanced Materials, it stated, "The goal is to establish strategic development and sales partnerships in the railway and defense sectors for battery pack and ESS supply projects utilizing secondary battery technology."
With Initech's ownership shifting from BC Card's HNC Network to KT DS, then to private equity, and now to Enchem just in the 2020s, internal confusion is evident. The Initech labor union, established in November last year, held a press conference on the 18th of last month to denounce the "hasty sale" by KT and has been conducting one-person protests. They argue that the sales contract is skewed toward short-term profit generation for private equity, which could lead to employment instability.
Hwang Seon-hyung, head of the Initech branch of the Korean Confederation of Trade Unions (KCTU) Chemical, Textile, and Food Workers' Union, stated, "As the sale and acquisition have concluded, suspicions regarding the source of funds involving the Ssangbangwool Group have not been clearly resolved. With a new major shareholder coming in and the business manager system in place, there are significant concerns about whether employment stability and proper succession will be maintained."