Toy and game content manufacturer SONOKONG will hold an extraordinary shareholders' meeting in July this year to revamp its management team. Last month, SONOKONG decided to acquire a 90% stake in Klasse Auto, Korea's largest official Volkswagen dealer, while actively pushing forward with new business initiatives.
SONOKONG and HK Mobility Company held a meeting on the morning of the 4th at the Klasse Auto Volkswagen Seongsu Service Center to explain the background of the acquisition of Klasse Auto and the direction of future business initiatives. HK Mobility will complete a capital increase of 5 billion won on the 18th, becoming SONOKONG's new largest shareholder, following H2 Partners.
Han Young-chul, CEO of HK Mobility, said at the meeting, "With the advent of the electric vehicle era, I believe it is time to change the distribution network centered around manufacturers and dealers," and added, "As cars are a 'tool' rather than an 'asset', we plan to promote a business to ensure consumers can enjoy this 'tool' conveniently."
HK Mobility is composed of a 50% equity stake held by CEO Han and his relatives and a 50% stake held by Kim Deuk-myeong, former CEO of used car company Auto Plus. The two will join the main management team at the extraordinary shareholders' meeting in July and participate in the management of SONOKONG as major shareholders. Currently, Im Seong-jin, the chairman of SONOKONG and CEO of H2 Partners, is expected to step away from company management and take on the role of a financial investor (FI) in the second-largest shareholder position.
CEO Han emphasized, "I do not know what title I will be appointed to at the extraordinary shareholders' meeting in July, but I plan to contribute to creating a new vision for SONOKONG from a position of responsibility."
Klasse Auto has been selected as an official Volkswagen dealer since August 2005 and has maintained its status as the number one dealer in Korea since 2008. It previously underwent a change of hands with VIG Partners, a private equity firm. The company recorded revenues of 153 billion won in 2022, 117.5 billion won in 2023, and 104.7 billion won last year.
Klasse Auto opened a new service center in Haeundae, Busan, this March, expanding its business into the Yeongnam region, and plans to officially open a sales office in July. Between August and September this year, it also plans to unveil a maintenance facility located in Munhyeon-dong, Nam-gu, Busan. Klasse Auto has accounted for 19-20% of total Volkswagen sales, and as sales areas expand into Busan, it is estimated that an additional 9-10% in sales can be secured.
Klasse Auto believes that the opening of the new service center in Busan will enable them to increase their existing sales by an additional 50%. Additionally, due to the acquisition of SONOKONG, they plan to expand into the used car business as well.
CEO Han mentioned, "Based on the quality and price competitiveness of Chinese electric vehicles, there has been a recent shift in vehicle perception from brand-centric to tool-centric." He added, "I see this as an opportunity to shake up the existing automobile distribution, and we aim to secure a distribution system for consumers through SONOKONG's own business or subsidiary form."
Last month, SONOKONG also issued a convertible bond (CB) worth 32 billion won to secure business funds. The 11th tranche CB, worth 22 billion won, and the 12th tranche CB, worth 5 billion won, will be subscribed to sequentially by the new largest shareholder, HK Mobility, on the 18th and 27th respectively. The remaining 13th tranche CB will be subscribed by KB Securities on the 27th.
The secured funds are planned to be used primarily for the expansion of offline stores to restore trust in SONOKONG's toy distribution channels. About 22 billion won is designated for the transfer of the company headquarters in Gangnam.
SONOKONG noted that its mainstay business in the toy sector is also recovering. The sales of Nintendo Switch are expected to grow more than 200% compared to the previous year.
Chae Hyun-il, the newly appointed manager at SONOKONG and former CEO of Innosys, commented, "Currently, the toy sector is reviewing whether it is viable by securing intellectual property (IP) that can be exported overseas," adding, "Inventory disposal and depreciation issues in the toy business have been largely resolved, and we expect a 100% profit turnaround on a consolidation basis next year."