Hahn & Co. overhauls Namyang board, ending family control

Private equity firm Hahn & Co. on Friday won shareholder approval to replace Namyang Dairy Products Co.'s board of directors with Hahn's executives and other new members, ending family control of the 60-year-old South Korean milk and beverage company, in which the buyout firm in 2021 agreed to secure a 53% stake.

At the annual general meeting (AGM) of shareholders, Namyang Dairy Chairman Hong Won-sik, who also leads its five-member board, voted in favor of the board reshuffle called for by the Seoul-based buyout firm.

Hong's approval, as the largest shareholder with a 51.68% stake as of the end of 2023, was necessary to push the board overhaul through. 

This means Hong is stepping down as the chairman of the company, founded by his late father Hong Doo-young in 1964. Hahn & Co. can thus finally exercise its rights as the largest shareholder after a three-year legal battle with Hong.

In January this year, the Supreme Court of Korea upheld the agreement signed between Hahn & Co. and Hong in 2021, under which the private equity house would acquire a 53% stake in Namyang from him and his family for 310.7 billion won ($230 million).

The legal battle was triggered after Hong abruptly canceled the deal a few months later.

UNEXPECTED SUPPORT

Hong’s support for the board overhaul came as a surprise to both Hahn & Co. and other shareholders. He did not show up at the AGM but exercised his voting rights through a representative.

He could have opposed it as he is involved in another legal dispute with the private equity house, which is seeking about 50 billion won in damages from Hong and his family over the delay in the acquisition deal.

Industry observers said he might not want to offend Hahn & Co. as he is also asking for a job as an advisor of Namyang, although the PE firm plans to change Namyang’s name given its tarnished image over the past decade.

VETO OF STOCK SPLIT

Hong also backed Hahn & Co. to veto activist fund Tcha Partners’ demand to amend the articles of association for a 10 for 1 stock split. The fund holds a 3% stake in Namyang.

A stock split could make delisting Namyang through a tender offer difficult.

Namyang has faced a series of corporate-level scandals since 2013. After the COVID-19 outbreak, the company faced blowback from the claim that its yogurt drink Bulgaris may offer protection against the pandemic, fueling nationwide fury and an ensuing boycott.

Following the public backlash, Hong resigned from his position in May 2021 and agreed to sell a 53% stake to Hahn & Co.

In 2023, Namyang posted an operating loss of 72.4 billion won, marking its fourth straight year of losses.

Write to Hyung-Joo Oh at ohj@hankyung.com

Yeonhee Kim edited this article.