Harim seeks Genofocus purchase to enter biotechnology business

Harim Co., South Korea’s top poultry processing company, is seeking to acquire Genofocus Inc., a Kosdaq-listed industrial and pharmaceutical enzyme developer, to enter the fast-growing biotechnology business.

Harim intends to buy a 34% stake in Genofocus held by its top managers and related parties, people familiar with the matter said on Monday.

The value of the stake held by its top managers is estimated at around 48 billion won ($37 million), but if the management rights are included, the value of the stake up for grabs will be much higher, the sources said.

Pan Jae-gu, founder and chief technology officer of Genofocus, is currently the largest shareholder with a 24% stake. Chief Executive Kim Eui-joong holds 10% of the biotech company.

“Talks are in an advanced stage. Specific takeover proposals have been discussed, although there are still some issues to be ironed out,” said one of the people with knowledge of the matter.

Genofocus, listed on Korea’s junior Kosdaq market, closed 5.5% higher at 6,390 won on Monday, compared with the broader market’s 0.1% fall.

Spun off from the state-run Korea Research Institute of Bioscience and Biotechnology, Genofocus specializes in developing microbiome-based therapeutics and bio-healthcare materials

Established in 2000 by Pan, a former biotechnology researcher at KAIST, the company also has 10 new drugs, including an age-related macular degeneration (AMD) treatment candidate, in the pipeline.

Its sales revenue has steadily increased from 14.9 billion won in 2019 to 18.8 billion won in 2020 and 25.9 billion won in 2021. However, the company is still losing money with an operating loss of 3.8 billion won in 2021.

SPECIALIZED IN ENZYMES

Industry sources said Harim founder and Chairman Kim Hong-kuk visited Genofocus several times to show his interest in the company.

The acquisition of Genofocus would strengthen Harim’s ambition to become a general food company, bolstered by the biotech firm’s specialty in enzymes, key ingredients for microbiome-based health food and functional cosmetics, industry watchers said.

Genofocus, with about 140 billion in market capitalization, is also developing a microbiome-based eye disease drug.

The company’s bio-healthcare material business accounted for 43% of its entire sales in 2021 while its sales of lactase, an enzyme that aids in the digestion of lactose, took up 16%.

Genofocus produces bio-healthcare materials through its affiliate GF Fermentech Co.

The biotech company plans to conduct phase 1 clinical trials of its AMD pill, GF-103, in the US by the end of this year.

It raised 27 billion won to build a microbiome medicine plant in June.

HARIM SEEKS NEW GROWTH DRIVERS

Founded in 1986 as Harim Food, the poultry processor grew rapidly alongside the chicken franchise boom in the 1980s, driven by the huge popularity of seasoned spicy chickens among Koreans.

However, Harim has been looking for other growth drivers as the business of chicken processing has slowed amid fierce competition with local rivals such as Maniker Co.

In recent years, Harim also joined the domestic home meal replacement (HMR) market with its ready-to-eat seasoned chicken products and ready-to-heat rice and instant noodle products.

Harim, Korea’s 27th-largest conglomerate, posted 32.1 billion won in operating profit on sales of slightly over 1 trillion won in 2021.

As part of its business diversification, Harim acquired Pan Ocean Co., Korea's leading bulk carrier, from the STX Group, in 2015.

Write to Jae-young Han, Jeong-Min Nam and Soo-Jung Ha at jyhan@hankyung.com
In-Soo Nam edited this article.