"'Tearful Apology' Was It a Lie... Namyang Dairy Products Sale Ends in Disaster (Comprehensive)"

Demand to Maintain Positions of Two Sons and More
Minutes Suggest Change of Heart in Management Rights Transfer
Rumors of Stock Sale Collapse Emerge
Deal Falls Through Just 3 Months After Signing

Namyang Dairy Plans Future Resale
"Cannot Sell to Other Buyers"
Court Rules in Favor of Hahn & Co.

[Asia Economy Reporter Lim Hye-seon] The acquisition and merger (M&A) deal of Namyang Dairy Products, triggered by the so-called ‘Bulgaris incident,’ began to falter when Hong Won-sik, chairman of Namyang Dairy Products, suddenly postponed the extraordinary shareholders' meeting to finalize the sale process on July 30. Earlier in May, a stock purchase agreement worth 310.7 billion KRW was signed between Chairman Hong’s family and Hahn & Company, and after approval from the Fair Trade Commission, the closing date was set for 10 a.m. on July 30. Accordingly, Chairman Hong’s side planned to hold the extraordinary shareholders' meeting at 9 a.m. on the 30th to approve the sale. Various related procedures, such as the registration of executive appointments and resignations, were also prepared based on the closing date. However, Chairman Hong’s side unilaterally postponed the shareholders' meeting by six weeks without consulting Hahn & Company, citing the need for “more preparation.”

This sparked rumors of a “sale collapse,” and after remaining silent for two weeks, Chairman Hong attempted to calm the situation by stating, “Nothing has changed.” Nevertheless, he showed signs of ‘changing his mind’ by hiring the litigation-specialized law firm LKB & Partners and promoting and reinstating his two sons. On the 23rd of last month, Hahn & Company filed a lawsuit at the Seoul Central District Court demanding prompt fulfillment of the closing obligations from Chairman Hong’s side. Ultimately, on the 1st, Chairman Hong notified Hahn & Company of the termination of the stock purchase agreement?just three months after signing the contract.

"It was an unequal contract"

Chairman Hong’s side stated, “In the M&A deal, we did not even receive a single penny as a deposit, which is highly unusual,” and added, “The contract terms were unilaterally favorable to Hahn & Company, but we quietly proceeded with the stock sale contract to fulfill the greater purpose of restoring normal management of Namyang Dairy Products through a change in management rights.” However, they claimed that Hahn & Company acted as if they owned Namyang Dairy Products even before the deal was closed, interfering unfairly in management and hastening the closing without honoring prior promises. They also said Hahn & Company changed their attitude after signing the contract, refusing to fulfill pre-agreed terms and violating confidentiality obligations.

Chairman Hong’s side appealed, “We decided that we could not hand over Namyang Dairy Products, which has been carefully built over 57 years since my late father’s time, to such an immoral private equity fund that easily changes its words.”

Regarding the background of the sale collapse, the investment banking industry believes that Chairman Hong’s side requested changes to the conditions, but Hahn & Company did not accept them. In a recent statement, Hahn & Company said, “Despite continuous inquiries and persuasion, the seller’s side remained silent for over two weeks and then proposed negotiations by setting unreasonable preconditions, which we politely declined.” There are various rumors, such as “Chairman Hong’s side demanded that the two sons keep their positions,” “They tried to keep Baekmidang separate from the company sale,” and “They demanded a higher sale price.” Hahn & Company stated, “We have not violated confidentiality obligations” and “We hope the seller’s side will directly disclose what the pre-agreed terms were.”

Court: "Cannot sell to another buyer"

It is expected that the legal battle between Chairman Hong’s side and Hahn & Company will intensify. Industry consensus is that Hahn & Company holds an advantageous position in the lawsuit.

First, the court sided with Hahn & Company. The court approved Hahn & Company’s provisional injunction request to prohibit the sale of Namyang Dairy Products’ shares. As a result, Namyang Dairy Products is effectively blocked from being sold to any buyer other than Hahn & Company. Hahn & Company filed the injunction after Namyang Dairy Products failed to fulfill the closing obligations following the stock purchase agreement (SPA) signed in May. The court accepted the case, viewing Chairman Hong’s request to terminate the contract as a mere change of mind.

Chairman Hong’s side stated in a press release that “Once the legal dispute with Hahn & Company is resolved, we plan to immediately resume the sale process.” However, with the injunction on the sale of Namyang Dairy Products’ shares accepted, it has become difficult for Chairman Hong’s side to seek other buyers.

The stock price is also fluctuating again. After the M&A announcement, Namyang Dairy Products’ stock price soared from the 300,000 KRW range to over 700,000 KRW, more than doubling, but as the sale became uncertain, it has dropped to around 550,000 KRW as of today.

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