Samsung Biologics’ 3 Trillion Won Rights Offering... Key Points Drawing Investor Attention [Click eStock]

3 Trillion Won Rights Offering for PolyPeptide Acquisition
Shinyoung Securities: "Need to Verify Facility Investment Plans and Progress"

Samsung Biologics has decided to proceed with a shareholder-allotted rights offering worth 3 trillion won. The move is intended to raise funds for the acquisition of PolyPeptide Group (PPG), a Swiss peptide contract development and manufacturing organization (CDMO). However, the question lies not with the capital increase itself, but rather with its sequence. Critics argue that before turning to shareholders for funding, the company should have provided a thorough explanation and persuasion regarding its medium- to long-term investment plans.

Changed Within a Month: “Rights Offering Was Considered the Last Resort”

On September 1, Shinyoung Securities maintained its ‘buy’ rating on Samsung Biologics but expressed regret that the company chose a shareholder-allotted rights offering as its sole method of fundraising.

Previously, on August 28, Samsung Biologics announced a rights offering for shareholders, followed by a public offering of forfeited shares. The planned issuance includes 2.27 million common shares at an expected issue price of 1,322,000 won per share, with total proceeds anticipated to be approximately 3 trillion won. Of this, 2.7 trillion won is earmarked for the acquisition of PPG, with about 295 billion won allocated to other facility investments.

The company’s explanation is clear: In a high interest rate environment, the cost of issuing corporate bonds has risen, and relying entirely on borrowing would significantly increase the debt ratio and dependence on borrowings. Additionally, as a substantial portion of the company’s medium- to long-term investment plans—which extend through 2034—is concentrated in the early stages, proactively securing liquidity is deemed necessary.

Nevertheless, the market remains uneasy. In July, when Samsung Biologics first announced its plan to acquire PPG, the company mentioned that it was considering various financing options, including loans, bond issuance, and a rights offering, emphasizing that a rights offering would be the last resort. Yet, little more than a month later, it opted for a shareholder-allotted rights offering. For investors, it is inevitable to question, “Why now, and why use a full-scale rights offering?”

The Gap Between Plans and Reality: “Investor Concerns Must Be Calmed”

The company's medium- to long-term investment plans, which amount to 15.4 trillion won, have also emerged as a source of investor anxiety. Samsung Biologics aims to invest 2.71 trillion won in the PPG acquisition, 1.9 trillion won in expanding Plant 6, 7 trillion won in expanding the third bio campus, 1.76 trillion won in expanding Plant 7, 690 billion won in expanding the U.S. plant, and 1.34 trillion won in additional investments. In terms of scale, it is an ambitious blueprint to further evolve into a global CDMO company.

However, an ambitious blueprint does not automatically translate into trust. Concerns have been raised about declining profitability and market momentum for existing businesses due to the maturity of the antibody CDMO market. Furthermore, there are fears that labor union issues could undermine its order competitiveness. The company’s next-generation modality competitiveness has also yet to be fully proven. Research analyst Jung Yookyung at Shinyoung Securities pointed out, “The order status of Plant 5 and the U.S. plant, the operating rate of the new ADC CDMO, and the timing of Plant 6’s groundbreaking have not been sufficiently disclosed, eroding market confidence in the company’s investment plans.”

The same applies to the PPG acquisition. While acquiring a new modality as a peptide CDMO is significant, there is criticism that detailed explanations of its technological and order competitiveness, synergies with affiliates, and medium- to long-term utilization plans are lacking. Analyst Jung stated, “Profitability had improved as Samsung Biologics separated the comparatively lower-margin biosimilar business, but the decision to acquire the also less profitable PPG for 2.7 trillion won raises concerns.” She continued, “How the high acquisition price will be justified, and how PPG will contribute to Samsung Biologics’ financial health, both remain unclear.”

Jung believes that the purpose of this rights offering is clear, and with a dilution ratio of only around 5%, it is unlikely to cause significant stock price volatility. Nevertheless, she expressed concern about its negative impact on investor sentiment. She added, “Whether Samsung C&T and Samsung Electronics, each expected to contribute roughly 1.29 trillion won and 940 billion won, respectively, will participate in the rights offering will have a crucial impact on investor sentiment. The company must thoroughly explain and substantiate its announced plans and progress in the future, which is essential for validating its long-term corporate value.”

This content was produced with the assistance of AI translation services.