Namyang top shareholder barred from casting vote at general meeting

Namyang Dairy Products Co.'s top shareholder and Chairman Hong Won-sik will be barred from exercising his shareholder rights at the company's general meeting on Oct. 29, according to a South Korean court ruling.

The verdict by the Seoul Central District Court on Wednesday was issued after Chairman Hong last month canceled a 310.7 billion won ($270 million) agreement to sell a majority of his company to Seoul-based private equity firm Hahn & Co.

The court decision marked the first ruling to validate the contract, in favor of Hahn & Co. which had filed an injunction to prohibit Hong, his wife and their grandson from casting votes at the Oct. 29 shareholder meeting.  

"It was confirmed their share purchase agreement (SPA) was closed as of 10 a.m. on July 30, and Chairman Hong's notification of the termination of the agreement is invalid," the court ruling said.

"In addition, the SPA was aimed at allowing Hahn & Co to secure management rights of Namyang Dairy. Chairman Hong should be stopped from taking any action against it."

On May 27, Hong and the two family members agreed to sell a combined 53% stake in the company for 310.7 billion won to the PE firm. The transaction was supposed to be endorsed at Namyang's shareholder meeting on July 30.

The agreement came a month after the Ministry of Food and Drug Safety reported Namyang Dairy to the police for allegedly exaggerated advertisements for its popular yogurt drink Bulgaris. In April of this year, Namyang claimed the drink was found to be effective in preventing COVID-19 infections.

But the 71-year-old chairman did not appear at the July 30 shareholder gathering, demanding more time to prepare for the deal closing.

At an extraordinary shareholder meeting scheduled for Friday, Chairman Hong had planned to replace three internal board of directors and an outside board member with those supportive of him, so that he would stop his company being sold.

NO BUYER ALLOWED OTHER THAN HAHN & CO

The latest ruling comes on the back of  the previous decision by the same court on Sept. 1 that banned Hong and his two family members from seeking a new buyer of their shares other than Hahn & Co., accepting the request filed by the PE house.

"This latest ruling confirmed Chairman Hong's obligation to transfer his shares in Namyang Dairy to Hahn & Co. in accordance with the share purchase agreement," a Hahn & Co. source told The Korea Economic Daily.

Meanwhile, South Korea's national tax agency on Wednesday raided Namyang's headquarters and two other offices in Seoul, Yonhap reported, citing industry sources. The National Tax Service is understood to launch a special tax investigation into the food and beverage company, instead of a regular probe conducted every four to five years.

According to the report, the tax probe appears to be related to three main issues: alleged appropriation by the Hong family of the company money; the alleged exaggeration of the anti-coronavirus effects of Bulgaris; and its abrupt cancellation of the contract to sell management rights to Hahn & Co.

Write to Hyun-ah Oh and Ji-hye Min at 5hyun@hankyung.com
Yeonhee Kim edited this article.