[비즈한국] Lee Yang-gu, Chairman of Dongsung Pharmaceutical002210 (63), has signed a contract to sell his entire stake in the company to Brand Refactoring. Chairman Lee is the largest shareholder of Dongsung Pharmaceutical. Once this transaction is finalized, Brand Refactoring will become the largest shareholder and gain management control. Currently, Dongsung Pharmaceutical is led by CEO Na Won-gyun (39), who is the nephew of Chairman Lee. It is reported that Chairman Lee sold his shares independently without consulting CEO Na. Consequently, CEO Na now faces the sudden risk of losing management control. Established in 1957, Dongsung Pharmaceutical is a mid-sized pharmaceutical company well-known for its stomach medicine "Jeongro-hwan" and hair dye "Seven-Eight."
Behind the Scenes of Chairman Lee Yang-gu's Sudden Stake Sale
In October of last year, Dongsung Pharmaceutical appointed Vice President Na Won-gyun as the new CEO. The previous CEO, Chairman Lee Yang-gu, transitioned to a non-registered executive role. CEO Na is the nephew of Chairman Lee. The pharmaceutical industry interpreted this as a succession process, with the Chairman handing over management control to his nephew. At the time, Dongsung Pharmaceutical stated, "Chairman Lee Yang-gu will resign from his board position, step back from the front lines of management, and focus on the PDT (Photodynamic Therapy) business for the remainder of his term."
However, on the 21st, Chairman Lee suddenly announced the sale of his entire 14.12% stake in Dongsung Pharmaceutical to Brand Refactoring. Between April 21 and 22, the Chairman sold 10.80% of his stake to Brand Refactoring. He stated that the remaining 3.32% would be sold following the completion of an extraordinary shareholders' meeting.
Dongsung Pharmaceutical disclosed that it "plans to hold an extraordinary shareholders' meeting within 50 days of the stock purchase agreement date (April 21)." The company added that it would propose agenda items regarding amendments to the articles of association and the appointment of directors and auditors. Accordingly, Dongsung Pharmaceutical will hold the extraordinary meeting before June 10 to address the appointment of new management.
Chairman Lee Yang-gu sold his stake at 3,256 won per share, totaling 12 billion won. On the 21st, when the transaction took place, Dongsung Pharmaceutical's stock price ranged between 3,720 and 3,905 won. It had risen as high as 4,325 won on the previous trading day, April 18. The Chairman sold his stake at a price lower than the market value.
Once the transaction is completed, the shareholders of Dongsung Pharmaceutical will be: Brand Refactoring (14.12%), CEO Na Won-gyun (4.09%), Lee Kyung-hee (66, 1.55%), and Lee Yong-hoon (34, 1.26%). Lee Kyung-hee is Chairman Lee’s older sister and CEO Na’s mother, while Lee Yong-hoon is Chairman Lee’s eldest son. Even if the stakes of CEO Na’s family are combined, they fall short of Brand Refactoring’s stake. Essentially, management control of Dongsung Pharmaceutical has shifted to Brand Refactoring.
Dongsung Pharmaceutical has expressed its bewilderment, noting that Chairman Lee sold his shares independently without consulting the company or CEO Na. The pharmaceutical industry interprets this move as a fallout between Chairman Lee and CEO Na that went unresolved, leading the Chairman to sell his stake and pass management control to an outside entity.
A Dongsung Pharmaceutical official stated regarding the sale, "We are not in a position to comment yet," adding, "Our stance will likely be determined based on the outcome of the extraordinary shareholders' meeting."
Brand Refactoring is a digital marketing company, and it is difficult to find any business connection to Dongsung Pharmaceutical. Baek Seo-hyun, the CEO of Brand Refactoring, also serves as the CEO of the biotech firm Celestra (formerly Clinomics). Consequently, some analysts suggest that the move aims to create synergy between Dongsung Pharmaceutical and Celestra. Neither Brand Refactoring nor Celestra has had any notable business ties with Dongsung Pharmaceutical until now. A Brand Refactoring official said, "Nothing has been decided yet, so there is nothing we can say separately."
The Final Variable: The Mysterious Identity of Deeplab Korea
CEO Na Won-gyun is at risk of losing management control just six months after taking office. However, there is a variable. On the 24th, Dongsung Pharmaceutical disclosed that it had issued 7 billion won worth of exchangeable bonds to a company called Deeplab Korea. These bonds can be exchanged for 7.13% of Dongsung Pharmaceutical’s treasury shares. Deeplab Korea can begin converting the bonds into shares starting May 26. If Deeplab Korea and Lee Kyung-hee support CEO Na, his friendly stake could increase to 12.77%, a level sufficient to compete with Brand Refactoring for control.
Deeplab Korea was established in November 2023, and a person surnamed Jeon serves as its CEO. Jeon is also the largest shareholder, holding 100% of the company's shares. Inside Dongsung Pharmaceutical, rumors are circulating that Deeplab Korea is an ally of CEO Na. A pharmaceutical industry insider hinted, "It seems the exchangeable bonds were issued with future management control in mind."
Not much is known about Deeplab Korea. Recently, in addition to Dongsung Pharmaceutical, the company also acquired 8 billion won in convertible bonds from Opticore380540. According to documents disclosed by Opticore, Deeplab Korea's total assets amounted to only 283 million won as of the end of 2023. The company also recorded no revenue in 2023. While this could be due to its early stage of business, the fact that a company of such small scale raised billions of won to acquire corporate bonds is drawing attention.
Deeplab Korea does not even have a confirmed website or social media presence. Neither its specific business activities nor its exact headquarters location is known. According to the corporate registry, Deeplab Korea’s business objectives include the sale of cosmetics, health functional foods, and the distribution of general food products. Its headquarters is listed on the second or third floor of a building in Mapo-gu, Seoul.
On April 28, Bizhankook visited the headquarters address listed in the corporate registry. The address was occupied by an advertising agency, and an employee stated, "We are a company unrelated to Deeplab Korea." The building's security guard also confirmed, "There is no office for a company called Deeplab Korea in this building."
It is possible that Deeplab Korea simply registered its address at the building with the owner's permission. However, this still leaves the question of where Deeplab Korea operates and what business it conducts. A company with an unclear location and business scope has raised billions of won to purchase Dongsung Pharmaceutical's exchangeable bonds. This is why the bond issuance is causing so much speculation.