South Korea’s cosmetics wholesaler Silicon2 Co. is set to invest $10 million in financially troubled luxury fashion e-commerce platform operator Balaan Co. with a condition of the takeover of its management control.
Silicon2 filed with a financial regulator on Feb. 28 that it decided to buy convertible bonds privately issued by Balaan for 15 billion won ($10.3 million), equivalent to about 11% of the cosmetics distributor’s equity capital.
Silicon2 has a call option to secure a 50% stake plus one share in Balaan from early 2028 until the end of that year.
“It is a strategic investment and stake acquisition for stable management control,” Silicon2 said.
Balaan has been in trouble due to excessive business expansion through aggressive marketing.
The high-end online shopping startup reported a net loss of 12.3 billion won in 2023 after a shortfall of 38 billion won in 2022. Sales shrank to 39.2 billion won from 89.1 billion won during the period.
CONDITIONS
The CBs, which have a yield to maturity of 4%, can be converted into shares for 61,171 won apiece from Feb. 28, 2026, to Feb. 27, 2030. The CBs mature on Feb. 28, 2030.
Silicon2 is set to invest 7.5 billion won first and inject the remainder from Nov. 1, 2025, to May 1, 2026, only if Balaan generates more than half of its revenue from the sale of directly purchased goods and reports operating profits every month.
Silicon2, which sells South Korean cosmetics in about 100 countries worldwide, enjoyed healthy earnings thanks to the global craze for K-beauty products.
The Kosdaq-listed company’s operating profit more than tripled to 111 billion won in the first three quarters of 2024 on a consolidated basis from a year earlier as sales more than doubled to 518 billion won.
By Da Eun Choi
max@hankyung.com
Jongwoo Cheon edited this article.
