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Corporate governance

Celltrion makes first step in streamlining governance structure

The structural change projected to accelerate the era of second-generation management led by the founder's two sons

By Sep 17, 2021 (Gmt+09:00)

Celltrion founder and honorary chairman Seo Jung-jin speaking at JPMorgan Healthcare Conference last year.
Celltrion founder and honorary chairman Seo Jung-jin speaking at JPMorgan Healthcare Conference last year.

South Korea’s pharmaceutical conglomerate Celltrion Group has made its very first step in reforming corporate governance structure by merging three private units into a single entity.

The group’s three unlisted companies Celltrion Holdings, Celltrion Healthcare Holdings and Celltrion Skincure held shareholder meetings on Sept. 16 to approve their three-way merger into a single entity. Sources say that the new entity, to be created by Nov. 1, will likely maintain the name of Celltrion Holdings.  

The group founder and honorary Chairman Seo Jung-jin owns controlling stakes in all three companies: 95.5% in Celltrion Holdings, 100% in Celltrion Healthcare Holdings and 70.2% in Celltrion Skincure.

Celltrion Group in Sept. 2020 had also announced that it will also merge its three publicly listed units, namely Celltrion Inc., Celltrion Pharm Inc. and Celltrion Healthcare Co. as part of its plan to strengthen financial stability.

But others note that the streamlining of the governance structure is a means of preparing for the succession of management to the two sons of Seo Jung-jin. The elder son Seo Jin-seok is currently serving as the senior vice president at Celltrion, whereas the younger son Seo Joon-seok is an executive director at Celltrion Healthcare.

Celltrion founder's elder son Seo Jin-seok (left) and Seo Joon-seok (right).
Celltrion founder's elder son Seo Jin-seok (left) and Seo Joon-seok (right).

Celltrion currently is responsible for the development and manufacturing of biosimilars, while Celltrion Pharm and Celltrion Healthcare are in charge of sales and distribution of the products. Celltrion Pharm has presence in the domestic market, whereas Celltrion Healthcare is an overseas-oriented unit.

In such a structure, Celltrion Group has been facing criticisms on unfair business practices. Celltrion as of 2019 recorded the highest portion of intra-group transactions among the country’s 64 largest conglomerates, with 37.3%. Such a high proportion fueled public criticisms around anti-competition.

Celltrion’s three publicly traded units are projected to complete the merger within the first half of next year.

“The merger of the public companies depends on the merger schedule of our private units, meaning that it will likely be pushed back to next year,” said a Celltrion representative.

The structure of the merger of its public units has not been finalized yet. Celltrion Group can either merge all three companies at once, or Celltrion can be first merged with one of the two other companies.

Currently, Celltrion Holdings owns Celltrion, which in turn owns Celltrion Pharm. On the other hand, Celltrion Holdings directly owns Celltrion Healthcare without Celltrion as an intermediate firm. Experts thus project that Celltrion might be merged first with its subsidiary Celltrion Pharm prior to being merged with Celltrion Healthcare.

Write to Jae-young Han at jyhan@hankyung.com

Daniel Cho edited this article.

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