Han & Company Urges Chairman Hong Family of Namyang Dairy to Step Down from Management

[Asia Economy Reporter Park So-yeon] Hannam & Company (Hannam & Co), a private equity fund management company that won a complete victory in the stock transfer lawsuit against the Hong family of Namyang Dairy Products, urged the prompt resignation of Chairman Hong and his family from the front line of management and the swift transfer of management rights for the early normalization of Namyang Dairy Products' management.

The Civil Division 30 of the Seoul Central District Court (Presiding Judge Jung Chan-woo) ruled on the 22nd in favor of the plaintiff Hannam & Co in the stock transfer lawsuit filed against Chairman Hong and his family. The court judged that Chairman Hong and his family have the obligation to transfer the shares for a fee as per the contract with Hannam & Co.

In response, Hannam & Co stated, "As Namyang Dairy Products' employees, minority shareholders, dealerships, and dairy farmers are suffering serious damage, we hope that the court's ruling will be accepted so that management normalization can be achieved quickly, and that Chairman Hong and his family will fulfill their promise made publicly to step down from the front line of management and promptly transfer management rights."

Hannam & Co added, "The stock purchase agreement signed by Chairman Hong on May 27 last year has been delayed for over a year due to Chairman Hong's side's unilateral delay in performance and claims of contract termination. As a result, Namyang Dairy Products is experiencing increasing operating losses and severe damage to corporate value, exacerbating the damage to employees, minority shareholders, dealerships, and dairy farmers."

Namyang Dairy Products recorded an operating loss of 19.9 billion KRW in the consolidated second quarter this year, marking 12 consecutive quarters of operating losses since the third quarter of 2019. Meanwhile, despite the 12 consecutive quarters of losses, Chairman Hong received a salary of 811 million KRW in the first half of this year alone.

Hannam & Co plans to put aside the ongoing legal battle since last year and promptly resume the management rights acquisition process. Furthermore, to restore consumer trust and enhance corporate value severely damaged by prolonged owner risk, they will accelerate management innovation.

Hannam & Co said, "Based on Hannam & Co's management principles, we will restore consumer trust and transform into a beloved brand and a new Namyang Dairy Products."

Hannam & Co signed a stock purchase agreement (SPA) in May last year to acquire shares of Namyang Dairy Products held by Chairman Hong's family, but Chairman Hong's side notified contract termination on September 1 of the same year.

Hannam & Co filed a lawsuit demanding the transfer of shares, stating, "Chairman Hong's side unilaterally notified contract termination," and obtained a temporary injunction from the court to prohibit the Hong family from exercising voting rights on the shares.

In the lawsuit, Chairman Hong's side claimed that Hannam & Co unfairly interfered with management and violated confidentiality obligations, leading to contract termination. They also argued that Hannam & Co deceived by stating that "negotiation details can be supplemented later," rendering the contract invalid, and that Kim & Chang law firm represented both parties during the contract process, making it void.

However, the court ruled that the stock purchase agreement between both parties remains valid. The court did not accept any of the issues raised by Chairman Hong's side against Hannam & Co.

Chairman Hong's legal representative said, "We regret that the court did not fully accept the fact that Hannam & Co's dual representation prevented proper protection of rights, and we plan to appeal immediately."