Court clears way for Hahn & Co.'s Namyang Dairy deal

Seoul-based private equity firm Hahn & Co. has won a legal battle against South Korea’s Namyang Dairy Products Co.’s owner family, which last year abruptly terminated a 310.7 billion won ($220 million) agreement to sell its majority stake to the PE house.

The Seoul Central District Court on Thursday ordered Namyang’s top shareholder and Chairman Hong Won-sik to carry out the transaction as previously agreed. The lower court also dismissed Namyang’s claims made against the buyout firm.

In May of 2021, Hong and his two family members agreed to sell a combined 53.08% stake in Namyang to Hahn & Co. for 310.7 billion won, slightly less than twice its market value at the time.

But the transaction has been put on hold since the 72-year-old chairman announced the termination of the deal four months later.

Hong argued that the contract was unfair and one-sided in favor of the buyer. On Thursday, Namyang said it will appeal the verdict, signaling a lengthy legal battle with the PE firm.

According to Hahn & Co., Chairman Hong “asked for” price renegotiation and made other hard-to-accept requests, after they signed the agreement.

Following the Thursday verdict, the Korean buyout firm said that it will focus on normalizing Namyang, which has been facing shortfalls since the third quarter of 2019.

In the second quarter of this year, the company posted a consolidated operating loss of 19.9 billion won. Chairman Hong received 811 million won in salary for the first half of the year.

Its shares have tumbled by almost half off their four-year peak of 813,000 won hit in July of last year.

The ruling comes after the lower court gave the nod to Hahn & Co.'s petitions to prohibit Namyang and the Hong family from selling their Namyang shares to a third party and to bar them from exercising shareholder rights at the company’s general meeting in October 2021.

Hong has led the producer of milk and yogurt drinks since 2003 as chairman. He decided to sell a majority of his company shortly after announcing his resignation from the post in May 2021, following a series of scandals at the company.

Write to Ji-Hye Min at spop@hankyung.com
Yeonhee Kim edited this article