CDW unit to buy back shares of biotech unit from controlling shareholder's son

PRECISION parts maker CDW Holding's wholly owned unit Tomoike Industrial will buy back shares representing 23.1 per cent of South Korean life sciences firm A Biotech Co (ABio) from the son of its controlling shareholder for 1.84 billion won (S$2.1 million).

The proposed acquisition is expected to close on April 6. After which, Tomoike Industrial will come to hold an aggregate of 620,000 shares representing 71.5 per cent of the total issued and paid-up capital in ABio, CDW said in a bourse filing on Monday (Apr 4).

This means that ABio will be an indirect subsidiary of CDW again.

Prior to the agreement to buy back the shares - 200,000 of them with a par value 5,000 won per share on a willing buyer-willing seller basis on normal commercial terms - Tomoike Industrial was holding 48.5 per cent of the total issued and paid-up capital in ABio.

Explaining its rationale for the move on Monday, CDW said ABio has "progressed substantially" since CDW last divested its shares to Koichi Yoshimi, whose father, Kunikazu, owns a company with a direct 50.82 per cent shareholding in CDW, in 2018.

CDW also said that ABio has since managed to build a strong team of researchers and established research partners comprising renowned universities and professors in the biotechnology field.

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ABio has also built up "sophisticated experience" in mining from its antibody library, which can be used to research and create new antibodies, it further noted.

With the latter development, ABio is running on a business model that carries a lower risk, as capital can now be recycled at a "quicker pace" through various means, CDW said.

ABio can license out these antibodies to other pharmaceutical companies for drug development in return for one-time licensing fees or milestone payments after successful completion of various preclinical stage testing, as well as earn royalty from the sale of the final approved drugs, it added.

CDW also pointed out that ABio is a joint owner of the anti-Cripto-1 antibody, which has shown promise in inhibiting the self-proliferation of cancer stem cells. The antibody was patented in September 2020.

"In view of the foregoing, the Board is of the view that further investment into (ABio) is an attractive proposition to the group and it is an appropriate time for (Tomoike Industrial) to obtain further control of (ABio)," said CDW.

The consideration represents a per share selling price of 9,200 won for the subject shares, which reflects a discount of about 72.1 per cent from the per share valuation of 33,005 won set out in ABio's independent valuation, CDW noted.

CDW also said the consideration reflects a 12.8 per cent discount from the per share selling price of 10,550 won based on the previous disposal consideration.

The 2018 transaction saw Tomoike Industrial selling 280,000 shares in ABio to Yoshimi for 2.95 billion won in cash. At that time, the life science business was a non-core business of CDW, and ABio's business was at a developmental stage and it required cash flow to support its research and development efforts, it said.

The transaction then was also to align the interest of Yoshimi, who has a strong network of contacts in the biotechnology industry in Japan and Korea, CDW said.

Shares of CDW closed flat at S$0.28 before the announcement on Monday.