Hanmi Pharm's 'Moja's Rebellion' Legal Battle Begins... "Global Leap" vs "Self-Interest Motive"

The 'Mother and Son Rebellion' surrounding the integration of Hanmi Pharmaceutical Group and OCI Group has entered its first round. The provisional injunction hearing filed by the eldest son and second son, Lim Jong-yoon, CEO of Hanmi Pharmaceutical, and Lim Jong-hoon, CEO of Hanmi Precision Chemical, opposing the integration decision led by Song Young-sook, Chairwoman of Hanmi Science, and her eldest daughter, Lim Joo-hyun, CEO of Hanmi Pharmaceutical, is about to begin.

Exterior view of Hanmi Pharmaceutical headquarters

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According to the court on the 21st, the 31st Civil Division of the Suwon District Court will start the first hearing of the provisional injunction to prohibit the issuance of new shares filed by CEOs Lim Jong-yoon and Jong-hoon against Hanmi Science in the afternoon. OCI Holdings has also applied to participate as an auxiliary party in the injunction, so all parties involved in this dispute are expected to gather.

The issuance of new shares by Hanmi Science is one of the key links in the integration of the two groups. This integration is proceeding in a way that OCI secures a 27.0% stake in Hanmi Science by combining Hanmi Science's issuance of new shares (8.4%) to OCI, the sale of shares by Chairwoman Song and CEO Lim Joo-hyun's two children, and the stock contribution in kind by Chairwoman Song and CEO Lim Joo-hyun to OCI. CEO Lim Joo-hyun and others will hold a 10.4% stake in OCI Holdings through the stock contribution in kind. If the provisional injunction is granted, one of the pillars of the integration work will be shaken.

The core issue of the provisional injunction is expected to be the purpose of the new share issuance. The two groups argue that this integration is a clever move to create future growth engines through synergy with Bukwang Pharmaceutical, a pharmaceutical company under OCI, resolving Hanmi Science's debt, and securing funds to expand research and development (R&D). The plan is to lay the foundation for a leap to a global big pharma through an inter-industry combination of pharmaceuticals and chemicals, similar to the German Bayer model mentioned by OCI Holdings Chairman Lee Woo-hyun.

On the other hand, CEOs Lim Jong-yoon and Jong-hoon claim that the integration is for the 'private gain' of Chairwoman Song and CEO Lim Joo-hyun. They explain that the mother and daughter, who were struggling with huge inheritance taxes after the death of founder Lim Sung-gi, sold Hanmi Pharmaceutical to OCI to solve this problem. Therefore, although it is effectively a merger, related procedures were ignored, and despite the management dispute between the mother and daughter and the brothers, the issuance of new shares was unilaterally decided, which they argue is a 'new share issuance for the purpose of defending management rights' prohibited by the Supreme Court precedent.

Attorney Kim Cheol, who declared auxiliary participation in the injunction, also stated, "From the perspective of minority shareholders, this new share issuance appears to be for strengthening the management rights of Chairwoman Song and CEO Lim Joo-hyun and for paying inheritance taxes," adding, "There are doubts about whether there was an urgent need for the new share issuance, and Hanmi Science's value was not properly evaluated."

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This provisional injunction is expected to be a turning point in the dispute. If the injunction is granted, the integration of the two groups will lose momentum, but if it is dismissed, it will gain renewed momentum. However, it is unlikely that a conclusion will be reached immediately at the first hearing; additional hearings may be held, or a decision may be made several days later. An industry insider said, "Since the payment date for the paid-in capital increase by new share issuance is at the end of April, the court may not consider it an urgent matter," adding, "However, since the Hanmi Science shareholders' meeting, another milestone, is scheduled for the end of next month, a decision will likely be made by early next month at the latest."

Separate from the injunction, a fierce vote battle between the two sides is already anticipated at next month's shareholders' meeting. The brothers have proposed appointing themselves as inside directors of Hanmi Science and nominating four outside directors, including Kwon Kyu-chan, CEO of DXVX (DXVX), affiliated with the Cori Group led by CEO Lim Jong-yoon. Since the Hanmi Science board can have up to 10 members, they plan to fill all remaining director seats with their side to regain management rights in one go.

However, the brothers hold a 28.4% stake in Hanmi Science, while the mother and daughter side hold about 35.0% when combined with the Gahyeon Cultural Foundation and the Lim Sung-gi Foundation. If it comes down to a vote battle, the mother and daughter side currently have the advantage. Shin Dong-guk, Chairman of Hanyang Precision and the largest individual shareholder (11.52%), has emerged as a 'key man,' but he has remained silent and has not expressed any position.

In response, the brothers have recently been actively rallying minority shareholders by arguing about 'sale without management premium' and 'stock price decline due to incorporation into an intermediate holding company.' Hanmi Pharmaceutical's side countered, saying, "This integration is a model that maximizes synergy while maintaining management rights as they are," and "(The integration) will further increase shareholder value for minority shareholders."

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