JoongAng Ilbo, which has entered a workout process, is seeking a new major shareholder through a public competitive bidding process involving a third-party allocation of new shares. As the recovery process for its major shareholder, JoongAng Holdings, complicates the sale of existing shares, the company plans to attract external funds through new share issuance to graduate from the workout by the end of the year.
According to industry sources on September 2, the management support office of JoongAng Ilbo shared updates on the workout process and the upcoming merger and acquisition (M&A) schedule in an internal notice sent to employees the previous day.
Hana Bank, the main creditor, notified the financial creditors' council on the same day about the second agenda item, initiating the process to seek approval for the M&A methods, including public competitive bidding and third-party allocation of new shares.
The workout for JoongAng Ilbo began on July 10, following a decision by the financial creditors' council. Hana Bank, acting on behalf of the council, selected Samil PwC as the financial advisor and Yulchon and Hwawoo as legal advisors. Samil PwC commenced financial due diligence on July 27, with the process, including site visits, expected to continue until the end of September. On August 7, Samil PwC was also appointed as the investment attraction advisor (lead manager for the sale), and on August 28, the creditors and advisory firms decided to proceed with the M&A through a public competitive bidding process for new share acquisition.
The core of this M&A is the 'third-party allocation of new shares.' Since JoongAng Holdings, the major shareholder, is undergoing a recovery process, selling existing shares or reducing capital requires prior approval from the bankruptcy court, which can be time-consuming. The creditors opted to issue new shares and directly inject the acquirer's funds into the company as a workaround. The notice stated that 'the scale of the injected funds will be a crucial factor in the future normalization of JoongAng Ilbo.'
The sale method has been confirmed as a public competitive bidding process. The creditors stated that they chose a method that maximizes fairness and objectivity, considering various stakeholders, including the financial creditors' council, bondholders, the bankruptcy court, and financial authorities. They highlighted advantages such as unlimited price competition, encouraging the formation of diverse consortiums, and identifying potential strong acquirers. The selection of evaluation criteria and the shortlist, as well as the selection of the preferred negotiation partner, will be handled by the M&A lead manager, with strict limitations on the participation of internal stakeholders, including JoongAng Ilbo's management.
The public competitive bidding announcement will be published in newspapers on September 4, with the deadline for submitting letters of intent (LOI) set for September 21. A shortlist will be selected in late September, followed by due diligence and the selection of a preferred negotiation partner. The process will then proceed with the signing of a conditional share subscription agreement (SSA), meetings of the financial creditors' council and bondholders, board and shareholder meetings, and the payment and registration of shares. The company stated, 'While the schedule may change depending on discussions with the creditors, we aim to graduate from the workout by the end of the year.'
This workout is distinct from typical corporate restructuring procedures under the Corporate Restructuring Promotion Act, as it is 'a workout based on M&A.' Generally, creditors bear financial losses while major shareholders contribute personal funds and lose management rights, and the company and employees undergo significant restructuring. JoongAng Ilbo has requested a swift M&A, citing its history of 13 consecutive years of operating profits, arguing that it can grow once it overcomes the financial crisis. The creditors, while maintaining that self-rescue measures and restructuring are essential, have decided to prioritize this method to minimize creditor losses and achieve early normalization.
In the notice, the company stated, 'We will express our opinions to ensure that a solid major shareholder is selected, prioritizing employee job security, enhancing the inherent value of journalism, and ensuring the company's sustainability.'
* This article has been translated by AI.
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