CHA Biotech Co., South Korea’s leading stem cell therapeutics developer, plans to resume an initial public offering of CHA Healthcare Co., a medical center operator, after combining the affiliate with CHA Cares Co. a hospital facility management and patient care service provider.
According to industry sources on Wednesday, CHA Biotech aims to complete the merger by the end of June 2026.
Last December, the company raised funds by issuing exchangeable bonds backed by CHA Healthcare shares to financial investors, including Seoul-based private investment firm STIC Investments Inc.
STIC Investments participated in the fund-raising on condition that CHA Healthcare go public by listing its shares on the main Kospi bourse by the end of 2027 while merging CHA Healthcare with CHA Cares by June 2026 to pave the way for the IPO.
Spun off from CHA Biotech in 2013, CHA Healthcare operates nearly 90 hospitals and infertility treatment centers in seven countries, including the US, Australia, Singapore and Japan.
CHA Biotech is the largest shareholder of CHA Healthcare with a 72.67% stake. Mirae Asset Group’s private equity fund is its second-largest shareholder.
The planned merger is designed to bolster CHA Healthcare’s financial status as CHA Cares maintains a stable stream of revenue and profit through transactions with other CHA Group affiliates, sources said.
RAPID EXPANSION OVERSEAS
Despite its rapid revenue growth, Cha Healthcare, which has been rapidly expanding in overseas markets, has struggled with profitability.
In the US, CHA Healthcare runs LA CHA Hollywood Presbyterian Medical Center, the biggest private general hospital in Los Angeles.
In 2022, it acquired the management rights of Fertility Specialists of Western Australia (FSWA), a major fertility center in Western Australia, following the acquisition of City Fertility, another Australian infertility treatment clinic in 2018.
CHA Group also offers immune cell treatments to cancer patients and stem-cell cures to diabetes patients at its affiliate Chaum’s Total Cell Clinic Tokyo in Japan
The company posted 8.1 billion won ($5.7 million) in operating profit on sales of 701.2 billion won in 2023. Its net profit stood at 6.7 billion won.
While its top-line growth has been strong, its relatively low profit margins have delayed its IPO plans.
In 2021, the company named Daishin Securities Co. and Shinhan Securities Co. as lead managers of its planned IPO.
The plan, however, was shelved hit by the outbreak of the COVID-19 pandemic.
MERGER TO BOOST CHA HEALTHCARE’S FINANCIAL STANDING
Despite its relatively small business size, CHA Cares has generated stable and consistent profits, making it a valuable asset for the combined entity.
In 2023, the company posted 2.7 billion won in operating profit on sales of 46 billion. Its 6.7 billion won in net profit matched that of CHA Healthcare, the business size of which was 10 times larger.
CHA Biotech is the largest shareholder of CHA Cares with a 46.49% stake.
Other major shareholders include Group Chairman Cha Kwang-yun, who owns 8.22% of CHA Cares, and CHA Medical Center Vice President Cha Won-tae, who holds a 7.19% stake.
CHA Biotech Group’s family members and related parties control 80% of CHA Cares.
Sources said discussions on the combination of CHA Healthcare and CHA Cares are expected to gain speed after CHA Biotech completes its ongoing rights offering.
In late 2023, CHA Biotech announced a 250 billion won rights offering to finance investments, including spending on Cha Healthcare’s overseas expansion.
The planned rights offering, however, has made little progress in the face of strong opposition from shareholders.
The company also faces regulatory hurdles.
The Financial Supervisory Service, Korea’s top financial watchdog, recently requested amendments to the company’s application for rights offering.
By Seok-Cheol Choi
dolsoi@hankyung.com
In-Soo Nam edited this article.
