KKR, Hanmi heirs likely to join hands for controlling stake

The two sons of Hanmi Pharmaceutical Group’s founding family, who were approved as board members of the holding firm Hanmi Science Co. at its shareholders meeting last week, are likely to join hands with private equity firm KKR & Co. to control the South Korean company, banking sources said on Tuesday.

The sons and KKR are in final negotiations to secure a combined 51% stake or more in Hanmi Science. They are expected to agree that KKR will buy shares in Hanmi Science and guarantee the sons’ rights to manage the holding firm, the sources added.

The New York-based PE giant has agreed to buy a stake from Hanyang Precision Co. Chairman Shin Dong-guk, who holds 12.15% and is the largest individual shareholder outside the founding family, and from the sons’ cousins who own a combined 3%, according to the sources.

KKR is forecast to purchase some shares from the sons, the eldest Lim Jong-yoon and the second Lim Jong-hoon, as the two brothers need funds to pay for their remaining inheritance taxes amounting to 90 billion won ($66.5 million).  

The Lim brothers and affiliated entities hold a combined 28.42% stake in Hanmi Science as of the end of March.

ALL IN THE FAMILY

The two Lims and KKR are also in talks with Song Young-sook, Hanmi Science chair and the brothers’ mother, and Lim Ju Hyun, the brothers’ sister and Hanmi Pharmaceutical Co. co-president, sources said.

The mother and daughter are considering selling some of their Hanmi Science stake to finance their remaining inheritance taxes, which amount to 170 billion won. They sought to sell their stake through the merger of Hanmi Science and chemicals giant OCI Holdings Co., but the deal collapsed as the sons, who opposed the merger, were approved to become Hanmi Science board members.

It would be easy for the Lim brothers and KKR to hold a combined 51% stake or more if the mother and daughter sell their Hanmi Science shares. If the negotiations break down, the brothers and KKR may extend a tender offer to the holding firm’s individual shareholders, who own a combined 16%, sources said.

If KKR becomes the single largest shareholder in Hanmi Science, it would give corporate control to the PE giant even though the Lim brothers plan to ensure their rights to manage the holding firm, sources said.

A spokesperson for the brothers declined to comment on the talks with KKR.  

KKR'S APPROACH

The founding family has been looking to finance their 500 billion won combined inheritance taxes since Lim Sung-ki, the founder of Hanmi Pharmaceutical Group, died in August 2020.

The Lim brothers were considering partnering with a global PE firm to win the family feud, and US investment firm Bain Capital LP was initially considered, according to sources.

However, KKR has gained the upper hand by offering more favorable terms than Bain Capital after the brothers won the battle against the merger at the shareholders meeting last week.

KKR played an important role in securing Hanyang Precision Chair Shin and the brothers’ cousins as friendly shareholders to the Lim brothers. Shin and the cousins sided with the brothers in exchange for selling their Hanmi Science shares to KKR at a significant premium, one source said.

“The cousins may have changed their minds at the last minute, deciding that it would be better to sell their shares at a premium than remain as minority shareholders. However, there is a possibility that the Lim brothers will consider Bain Capital’s last offer,” a source familiar with the situation said.

WENT FOR THE PREMIUM

The Lim brothers will hold only around a 40% combined stake in Hanmi Science even if they acquire shares from their cousins and Hanyang Precision's Shin.

To secure 51% or more, the brothers would need to buy some shares from their mother and sister, who own a combined 21.86%. Otherwise, the brothers would have to acquire some shares from individual investors, who hold a combined 16%.

"As a result, the brothers chose KKR, which offered a premium on the founding family's and Hanyang Precision's Shin's shares, instead of OCI, which didn't offer a premium. The reputation of the brothers, who pledged to lead the group well, would be damaged," a banking source said. 

Write to Jun-Ho Cha and Jong-Kwan Park at chacha@hankyung.com

Jihyun Kim edited this article.