OCI-Hanmi merger faces tougher hurdles amid family feud

Hanmi Pharmaceutical Group’s aim to merge with chemicals giant OCI Group is hitting some roadblocks amid a prolonged feud between the family owners of Hanmi, one of the top drugmakers in South Korea in terms of sales.

Lim Jong-yoon and Lim Jong-hoon, the two sons of the late Hanmi founder Lim Sung-ki, said on Tuesday that they are planning to return to group management to prevent the merger with OCI Holdings Co., which is being pushed by the brothers’ mother and Hanmi Chairwoman Song Young-sook, their sister and Hanmi Pharmaceutical Co. Co-president Lim Ju-hyun and OCI Chairman Lee Woo-hyun.

The two brothers aim to receive approval at the general shareholders’ meeting in March to return as inside board directors of Hanmi Science Co., the holding firm of Hanmi Pharmaceutical Group.

Lim Jong-yoon, the older brother and Hanmi Pharmaceutical co-president, plans to return as Hanmi Science CEO. The younger brother Lim Jong-hoon, Hanmi Pharmaceutical co-president and Hanmi Fine Chemical CEO, aims to become Hanmi Pharmaceutical CEO.

Last week, the two brothers filed a shareholder proposal to appoint themselves as inside directors of the holding firm and also put in place four additional directors, including two outside and two non-executive directors. The existing board consists of Chairwoman Song and three outside directors.

The two brothers said they don’t simply aim to sit on the board but intend to manage Hanmi Pharmaceutical Group, following the late founder’s will to grow the group as a leading global drugmaker.

SHAREHOLDER VALUE

The brothers’ movement follows the merger plan of Hanmi and OCI, which was announced last month. OCI Holdings said it will acquire a 27% stake in Hanmi Science, including a new 8.4% stake, for 770.3 billion won ($579.2 million), while principal shareholders of Hanmi Science, including sister and Hanmi Pharmaceutical President Lim Ju-hyun, will buy a 10.4% stake in OCI Holdings.

Under the agreement, Hanmi Science and OCI Holdings will respectively appoint two internal directors, including each of their CEOs, to form a joint five-person board of directors for the new entity, the firms said last month. OCI Chair Lee and Hanmi President Lim Ju-hyun will be the CEOs, the firms added.

The two brothers said they would cancel the merger with OCI and focus on restoring shareholder value once they reclaim control of the group.

“If Hanmi Science loses its holding firm status after its merger with OCI, its corporate value will be calculated based on its healthcare unit and only 40% of Hanmi Pharm shares. In this case, Hanmi Science’s stock will plunge to around 67% of the current price level and hurt shareholder value,” said Lim Jong-yoon.

“We will create a new board, which will consolidate Hanmi Science’s position as a holding firm and mobilize all strategies to restore its share price to the pre-pandemic level in 2018 or above,” he added.  
He also highlighted that the two brothers have capabilities to manage the holding firm and subsidiary Hanmi Pharmaceutical.

Lim Jong-yoon has been overseeing the group’s business in China since 2004 and was Hanmi Science's CEO for 12 years from 2010. Lim Jong-hoon has been chief of the medical device unit Hanmi Medicare, healthcare subsidiary Hanmi Healthcare and information tech division Hanmi IT. 

BATTLE FOR CONTROL

The Lim brothers have a combined 28.42% stake in Hanmi Science. Chairwoman Song and her affiliated persons and entities, including Lim Ju-hyun, photographic art-focused Gahyeon Foundation and bio research-focused Lim Sung-ki Foundation, have a combined 35%.

The brothers anticipate that the two non-profit organizations, which have a combined 7.9% stake in Hanmi Science, might not be able to exercise voting rights in the general shareholders meeting. They are planning to file a preliminary injunction to ban the two foundations from exercising voting rights if necessary, sources familiar with the situation said.

Last month, they filed a preliminary injunction against Hanmi Science’s rights offering for OCI, which was valued at 40 billion won.

If the injunction is granted, which could be as early as the second week of March, the merger plan will be dropped. If that occurs, the National Pension Service (NPS), which owns a 7.38% stake in Hanmi Science, is unlikely to support Chairwoman Song, sources said.

Shares of the main Kospi-listed Hanmi Science jumped 6.98% to close at 44,450 won on Feb. 13.

Write to Jong-Kwan Park at pjk@hankyung.com

Jihyun Kim edited this article.