Dongwha Pharm cancels acquisition of aesthetic device firm Hironic

Dongwha Pharmaceutical announced on Monday that it has officially terminated its stock purchase agreement with Hironic, a local aesthetic medical device company, fueling tensions between the two parties.

Hironic specializes in medical aesthetics devices and went public on Konex in 2013 before transitioning to Kosdaq in 2014. The company recorded 33.7 billion won ($24.1 million) in consolidated revenue, 5.3 billion won in operating profit, and 8.2 billion won in net profit in 2023.

"Post-agreement due diligence revealed disagreements regarding compliance with the Hironic representations and warranties," Dongwha  said.

The recent announcement follows Dongwha's intention to acquire Hironic for 1.607 trillion won to enter the medical aesthetics device market as part of its growth strategy in September.

The plan involved acquiring 8.38 million shares (45.09 percent of Hironic) from Hironic CEO and founder Lee Jin-woo, the company’s largest shareholder, and an affiliate Lee Eun-sook, at 14,400 won per share, amounting to 1.207 trillion won.

Dongwha also agreed to purchase 400 billion won worth of redeemable convertible preferred shares (RCPS) through a third-party rights offering, which would have increased its stake in Hironic to 57.8 percent.

Despite Dongwha's withdrawal, Hironic has insisted on proceeding with the capital increase. Hironic announced on Tuesday that it considers the third-party rights offering valid, even after Dongwha’s termination notice.

"We believe the third-party rights offering remains legally binding, and we will continue the rights offering while notifying investors of the risk that Dongwha's may fail to fulfill its payment obligations," Hironic said in a disclosure.

As a result, both companies are preparing for a legal confrontation.

"There is a dispute over the legality of Dongwha's contract termination, and this will ultimately be resolved through legal proceedings,” Hironic said.

Meanwhile, Dongwha noted that it has requested the return of the advance payment and is prepared to file a lawsuit to reclaim it, if necessary.