Samsung BioLogics said Friday that Biogen has exercised its call option and has acquired 49.9 percent of Samsung Bioepis’ share.
The call option comes during a heated argument between the Financial Supervisory Service (FSS) and Samsung BioLogics regarding the latter’s alleged violation of accounting regulations.
The FSS had accused Samsung BioLogics of violating the relevant accounting standards when it changed Samsung Bioepis from its subsidiary to an affiliated company at the end of 2015.
Samsung BioLogics had turned Samsung Bioepis, in which the company owned a 91.2 percent stake by the end of 2015, into an affiliate firm ahead of the former’s initial public offering on Nov. 10, 2016.
Samsung BioLogics turned to profit after changing the company value of Samsung Bioepis from book value, also known as acquisition value, to market value, also known as fair value. The FSS had pointed out that this process did not follow proper accounting rule.
Last month, Samsung BioLogics held a press conference countering the FSS’s allegations.
“We turned our subsidiary Samsung Bioepis into an affiliate firm as it became more feasible for Biogen, our joint venture partner, to exercise its call option as the results of Samsung Bioepis’ development of its first biosimilar product,” said Shim Byung-hwa, Samsung BioLogics business innovation team leader during the news conference.
With Biogen finally deciding to exercise its call option right, the two companies plan to finalize the contract on Sep. 28.
Samsung Biologics will then transfer 9,226,068 shares out of the total 19,567,921 held by the company to Biogen. Upon receiving the shares, Biogen will pay Samsung Biologics 50,000 won per share plus interest, or 748.6 billion won ($668.5 million) in total.
Also, Samsung BioLogics will reduce its debt-to-equity ratio to 35.2 percent, down from 88.6 percent in the first quarter of this year, as the company will have resolved the 1.9 trillion won derivatives liabilities tied to the call option.
With the completion of the contract, Samsung Bioepis will come under a full-fledged joint management system with the two companies having equal seats at the company’s board of directors.
“The two companies will actively cooperate with each other to ensure the takeoff of Samsung's biosimilar business in the global market,” Samsung BioLogics CEO Kim Tae-han said.
With Biogen’s using its call option, Samsung BioLogics has obtained evidence regarding its previous claims that it needed to change its accounting because of the high possibility of the company losing control of Bioepis due to Biogen's call options.
Whether the agreement will dispel accusations of the company remains to be seen, however, as the FSS’s focus is not on Biogen utilizing its call option but on if the call option agreement existed at the end of 2015.
The Securities and Futures Commission plans to hold a meeting next month to re-discuss the allegations brought against Samsung BioLogics.
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