Namyang Dairy's 'Trillions-Won Lawsuit Battle' Brewing?

[Image source=Yonhap News]

[Asia Economy Reporter Park So-yeon] The Namyang Dairy Products major shareholder family has remained silent since abruptly postponing the merger and acquisition (M&A) transaction schedule on the 30th of last month. The financial investment industry is analyzing that an unprecedented situation of the major shareholder's "no-show" has occurred, and a multi-billion-won lawsuit battle is entering the final countdown.

The buyer, Hahn & Company, is maintaining its stance that contract termination is not possible and is keeping the possibility of concluding the deal through dialogue with former chairman Hong Won-sik's side open. However, they are reviewing legal procedures including damages claims or forced execution in case former chairman Hong's side continues to "no-show."

On the 4th, a senior official from the investment banking (IB) industry emphasized, "Paying a penalty does not mean the contract can be terminated." The official stated, "What is clear is that corporate M&A transactions must be completed once all mutual conditions are agreed upon, and simple breach of contract due to change of mind is not recognized."

He added, "Contract termination is not possible, and Hahn & Company holds the right to acquire the company, so if the major shareholder side refuses to transfer the shares, other measures must be considered."

Since Hahn & Company agreed in the stock purchase agreement to conclude the transaction by the 31st of this month at the latest, it is expected that they will wait for contact from former chairman Hong's side at least until mid-month. Even if a shareholders' meeting is convened at the end of this month, a notice must be given two weeks in advance.

Previously, on the 30th of last month, Namyang Dairy Products held an extraordinary shareholders' meeting and postponed the agenda related to the transfer of management rights to September 14, which is later than the transaction closing date. If the contract between Namyang Dairy Products' major shareholder side and Hahn & Company does not proceed as planned, Hahn & Company is likely to be able to file for forced execution or damages claims against the major shareholder.

The contract signed in May between Namyang Dairy Products' major shareholder family and the buyer Hahn & Company reportedly included a clause prohibiting the seller from selling management rights to a third party. This clause is interpreted as being added to prevent simple contract termination due to change of mind, considering that the stock price could rise significantly after the sale news became public.

With former chairman Hong still not responding officially, the likelihood of being embroiled in a multi-billion-won lawsuit is increasing. A source from the IB industry said, "This is a very unusual situation even within the industry, so it is being watched with great interest."

This content was produced with the assistance of AI translation services.