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Cash-strapped Yellowmobile sells subsidiaries Excessive M&A activity deteriorates financial position

Translated by Ryu Ho-joung 공개 2020-06-18 08:00:29

이 기사는 2020년 06월 18일 08:00 더벨 유료페이지에 표출된 기사입니다.

South Korean mobile services company Yellomobile Inc is divesting a stake in its two Kosdaq-listed subsidiaries to address its cash issues that resulted from excessive mergers and acquisitions (M&A) activity.

The company plans to sell a controlling stake in Futurestream Networks and DAYLI BlockChain to local private equity firm Spring Hill Partners for about 90 billion won ($74 million), sources said on June 16.

Spring Hill Partners will take over a 48.05 percent stake in Futurestream Networks and a 25.86 percent stake in DAYLI BlockChain from each company’s top shareholder and its specially-related parties, according to sources.

Futurestream Networks provides mobile advertising services in six Asia-Pacific countries including China, Singapore and Vietnam as well as the domestic market. DAYLI BlockChain develops and provides Intelligent Transportation System solutions.

The proceeds from the sale will be used to improve the financial position of Yellowmobile, industry watchers said. The company had grown at a rapid pace with revenue increasing from 67 million won to 96 billion won for the first two years since its foundation in 2012. In 2014 it became the country’s second unicorn, or startup valued at $1 billion, following Coupang.

But excessive M&A activity by the company has deteriorated its financial health. For the past five years Yellowmobile has acquired more than 140 startups and smaller companies. This resulted in a rapid increase in borrowings, with the company’s total debt rising from 39.2 billion won at the end of December 2014 to 346.8 billion won at the end of September 2019.

The company stopped filing its financial statements after the third quarter of 2019 so its latest results are not available. But a notable improvement in the last two to three quarters is unlikely, industry watchers said. The company also received a disclaimer of audit opinion in 2017 and 2018.

“Yellowmobile is seeking to build up enough cash by selling Futurestream Networks and DAYLI BlockChain, both of which are among the key subsidiaries of the company,” an industry insider said. “Spring Hills Partners started marketing a project fund to finance the acquisition,” he added.

The sale came after the divestment of Yellowmobile’s another subsidiary Carelabs, which provides healthcare marketing services to hospitals.

In March Yellowmobile selected Maple Investment Partners as the preferred buyer to sell its stake in Carelabs along with mezzanine securities held by existing financial investors in the target. Green Cross, one of the country’s biggest pharmaceutical companies, is said to invest in the company through Maple Investment Partners’ project fund.

(Reporting by Byung-yoon Kim)
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