Court Orders "Chairman Hong Won-sik's Family to Transfer Namyang Dairy Products Shares to Hahn & Company" (Comprehensive)

Hong Won-sik, Chairman of Namyang Dairy Products / Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Kim Daehyun] In the first trial of the "300 billion KRW-scale merger and acquisition (M&A) lawsuit" between Namyang Dairy Products and Hahn & Company (Hahn & Co), Hahn & Co won. If the ruling is finalized, the Hong family, led by Hong Wonsik, chairman of Namyang Dairy Products, will have to transfer their shares to Hahn & Co, and the major shareholder of Namyang Dairy Products will change from Chairman Hong to Hahn & Co.

On the 22nd at 10 a.m., the Seoul Central District Court Civil Division 30 (Presiding Judge Jung Chanwoo) ruled in favor of Hahn & Co in the first trial of the stock transfer lawsuit filed against Hong Wonsik (72), chairman of Namyang Dairy Products, and his family, stating that "the Hong family must transfer the shares to Hahn & Co." The court also ordered the Hong family to bear the litigation costs.

The court stated that "the stock sale contract between both parties was concluded" and "the defendant's claim that the contract should be terminated is not accepted."

The court did not accept Chairman Hong’s repeated claim of "dual agency." Chairman Hong’s side argued that the contract was flawed because, although they appointed a M&A legal representative from Kim & Chang based on the sales advisor’s suggestion, Hahn & Co also appointed another lawyer from Kim & Chang. However, Hahn & Co countered that it is common for one law firm to represent both parties in an M&A, so there is no issue.

The court also rejected Chairman Hong’s claims that preconditions such as the "spin-off of Baekmidang" and "family privileges" were not fulfilled. Chairman Hong argued that the spin-off of Baekmidang and the food service division, which was led by his wife, advisor Lee Unkyung, and the guarantee of privileges for family members including his two sons who are executives at Namyang Dairy Products, were prioritized conditions that were not met, leading to the suspension of the sale. Hahn & Co stated that Chairman Hong focused on raising the per-share purchase price and did not emphasize conditions such as Baekmidang from the beginning.

Earlier, on May 27 of last year, the Hong family signed a stock sale contract to sell 53.08% of Namyang Dairy Products shares to Hahn & Co for about 310.7 billion KRW. After the news became public, expectations such as "resolving owner risk issues" acted as positive factors, causing Namyang Dairy Products’ stock price to soar.

Subsequently, Chairman Hong claimed that Hahn & Company did not fulfill the preconditions for the transaction and notified contract termination on September 1 of the same year. Hahn & Co filed three injunction applications, all of which were accepted by the court.

Regarding the ruling, Hahn & Co evaluated that "it confirms that the basic principles of contracts and market order must be upheld." They also urged Chairman Hong’s side, stating, "Employees, minority shareholders, dealerships, and dairy farmers of Namyang Dairy Products are suffering serious damage," and "to accept the court ruling for management normalization, step down from frontline management, and promptly transfer management rights."

Chairman Hong’s side announced plans to immediately appeal. They added, "During the process of selling the company inherited as a family business, the seller’s rights were not properly protected due to dual agency acts, and Hahn & Co did not fulfill mutually pre-agreed terms," and "we regret that the court did not sufficiently accept these points."

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